Growth forecasts, belief manipulation and capital markets

Frederik Lundtofte () and Patrick Leoni ()

European Economic Review, 2014, vol. 70, issue C, 108-125

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 agent: “conforming” and “dissenting.” 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 informative and uninformative equilibria. Informative equilibria are equilibria in which the government agency׳s equilibrium signal leads to a revision of beliefs. We demonstrate that the uninformative equilibria can in fact dominate the informative ones 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)
Date: 2014
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Growth Forecasts, Belief Manipulation and Capital Markets (2013)
Working Paper: Growth Forecasts, Belief Manipulation and Capital Markets (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:70:y:2014:i:c:p:108-125

DOI: 10.1016/j.euroecorev.2014.04.003

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