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Optimal Policy Intervention and the Social Value of Public Information / J G James, Phillip Lawler, Jonathan James

American Economic Review, Volume: 101, Issue: 4, Pages: 1561 - 1574

Swansea University Authors: Phillip Lawler, Jonathan James

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DOI (Published version): 10.1257/aer.101.4.1561

Abstract

Svensson (2006) argues that Morris and Shin (2002) is, contrary to what is claimed, pro-transparency. This paper reexamines the issue but with an important modification to the original Morris and Shin framework. Recognizing that central banks impact the economy not only indirectly via public announc...

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Published in: American Economic Review
ISSN: 0002-8282
Published: American Economic Association 2011
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URI: https://cronfa.swan.ac.uk/Record/cronfa5258
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Abstract: Svensson (2006) argues that Morris and Shin (2002) is, contrary to what is claimed, pro-transparency. This paper reexamines the issue but with an important modification to the original Morris and Shin framework. Recognizing that central banks impact the economy not only indirectly via public announcements, but also directly through policy actions, we consider the social value of public information in the presence of active policy intervention. Our results strengthen Morris and Shin's conclusions considerably: in particular, we find that public disclosure of the central bank's information is unambiguously, i.e., regardless of parameter values, undesirable. (JEL D82, D83, E52, E58)
College: School of Management
Issue: 4
Start Page: 1561
End Page: 1574