Author(s): George-Marios Angeletos, Luigi Iovino, Jennifer Lao
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.
Keywords: Fluctuations, informational frictions, strategic complementarity, coordination, beauty contests, central-bank transparency
JEL codes: C7, D6, D8