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Learning from Prices: Public Communication and Welfare

Author

Listed:
  • Manuel Amador

    (Stanford)

  • Pierre Olivier Weill

    (UCLA)

Abstract

We study the effect of releasing public information about productivity or monetary shocks using a micro-founded macroeconomic model in which agents learn from the distribution of nominal prices. While a public release has the direct beneficial effect of providing new information, it also has the indirect adverse effect of reducing the informational efficiency of the price system. We show that the negative indirect effect can dominate. Thus, the public information release may increase uncertainty about the monetary shock and reduce welfare. We find that the optimal communication policy is always to release either all or none of the information.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Manuel Amador & Pierre Olivier Weill, 2008. "Learning from Prices: Public Communication and Welfare," 2008 Meeting Papers 390, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:390
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    as
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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