The CNBC Effect: Welfare Effects of Public Information

Stephen Morris and Hyun Song Shin

No 1312, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: What are the welfare effects of enhanced dissemination of public information through the media and disclosures by market participants with high public visibility? For instance, is it always desirable to have frequent and timely publications of economic statistics by government agencies and the central bank? We examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but they also have a coordination motive arising from a strategic complementarity in their actions. When the agents have no private information, greater provision of public information always increases welfare. However, when agents also have access to independent sources of information, the welfare effect of increased public disclosures is ambiguous.

Keywords: Transparency; disclosures; coordination; overreaction to public information (search for similar items in EconPapers)
JEL-codes: C7 D8 E58 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-07
New Economics Papers: this item is included in nep-ent, nep-mic and nep-net
Note: CFP 1066
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in American Economic Review (2002), 92(5): 1521-1534

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