The Social Value of Information: A Test of a Beauty and Nonbeauty Contest

Thomas Lustenberger and Enzo Rossi

Journal of Money, Credit and Banking, 2022, vol. 54, issue 7, 2125-2148

Abstract: We demonstrate how the precision of public and private information can be measured and their welfare implications can be assessed. To this end, we develop and apply a procedure to test welfare results from a beauty and nonbeauty contest model based on survey forecasts of interest rates in a large country sample over an extended period of time. In most countries, interest rate forecasts are unbiased. In half of the countries, a higher precision of public information regarding interest rates increases welfare. This applies in particular to small open and emerging market economies. During forward guidance, public information is less precise than private information. On average, forecasters place greater weight on public than private information and rapidly correct errors contained in private information, while errors in public information last over the whole forecast horizon.

Date: 2022
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https://doi.org/10.1111/jmcb.12903

Related works:
Working Paper: The Social Value of Information: A Test of a Beauty and Non-Beauty Contest (2018)
Working Paper: The Social Value of Information: A Test of a Beauty and Non-Beauty Contest (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:54:y:2022:i:7:p:2125-2148

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