Growth Forecasts, Belief Manipulation and Capital Markets

Frederik Lundtofte () and Patrick Leoni ()

No 2010:8, Working Papers from Lund University, Department of Economics

Abstract: We analyze how a benevolent, privately-informed government agency would optimally release information about the economy's growth rate when the agents hold heterogeneous beliefs. We model two types of agents: "trusting" and "distrustful." The former has a prior that is identical to that of the government agency, whereas the latter has a prior that differs from that of the government agency. We identify both "revealing" and "nonrevealing" equilibria and demonstrate that the "nonrevealing" equilibria can dominate the "revealing" equilibria in terms of ex-post social welfare.

Keywords: Social welfare; information; forecasting; asset pricing; heterogeneous beliefs (search for similar items in EconPapers)
JEL-codes: D83 G11 G12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-07-31, Revised 2012-05-30
New Economics Papers: this item is included in nep-cba, nep-cta, nep-for and nep-reg
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Related works:
Journal Article: Growth forecasts, belief manipulation and capital markets (2014)
Working Paper: Growth Forecasts, Belief Manipulation and Capital Markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2010_008

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