How multiplicative uncertainty affects the tradeoff between information disclosure and stabilisation policy?

Meixing Dai () and Moise Sidiropoulos

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: In an economy characterised by Keynes’ “beauty contest”, policymakers can either disseminate their own information and abstain from stabilisation policy, or use an informational advantage to undertake active policy intervention. The contribution of this paper is to analyse how such a trade-off is affected by Brainard’s conservatism principle. We show that multiplicative uncertainty reduces the incentive for policy activism and weakens the argument for imperfect disclosure of the policymaker’s private information. Notably, a sufficient high degree of multiplicative uncertainty in the transmission of policy intervention would call for full disclosure of public information in the presence of stabilisation policy.

Keywords: Multiplicative uncertainty; heterogeneous private information; optimal information disclosure; policy intervention; strategic complementarities. (search for similar items in EconPapers)
JEL-codes: C72 D62 D82 E58 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mac and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2017-15

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