Real Rigidity, Nominal Rigidity, and the Social Value of Information

George-Marios Angeletos, Luigi Iovino and Jennifer La'O

No 543, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Does welfare improve when ?firms are better informed about the state of the economy and can better coordinate their decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can be the source of both nominal and real rigidity. Within this context we develop a taxonomy for how the social value of information depends on the two rigidities, on the sources of the business cycle, and on the conduct of monetary policy. JEL codes: C7, D6, D8. Keywords: Fluctuations, informational frictions, strategic complementarity, coordination, beauty contests, central-bank transparency.

Date: 2015
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Journal Article: Real Rigidity, Nominal Rigidity, and the Social Value of Information (2016)
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