On the social cost of transparency in monetary economies
Abstract: I study a class of models commonly used to motivate monetary exchange, extended to include a physical asset whose expected short-run return is subject to exogenous news events, but whose expected long-run return is independent of this information. I show that there are circumstances in which the nondisclosure of news by an asset manager is welfare-improving. When nondisclosure is infeasible, the framework admits a role for government debt. The theory is used to interpret the nondisclosure practices of reputable financial agencies and suggests caveats for legislation designed to promote financial market transparency.
File(s): File format is application/pdf http://research.stlouisfed.org/wp/2010/2010-001.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2010