Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con
Lars E.O. Svensson
CEPR, and NBER
American Economic Review 96 (2006) 448-452.
First draft: January 2005
This version: August 2005
The main result of Morris and Shin (2002) (restated in papers by Amato, Morris, and Shin (2002) and Amato and Shin (2003) and commented upon by Economist (2004)) has been presented and interpreted as an anti-transparency result: more public information can be bad. However, some scrutiny of the result shows that it is actually pro transparency: except in very special circumstances, more public information is good. Furthermore, for a conservative benchmark of equal precision in public and private information, social welfare is higher than in a situation without public information.
JEL Classification: D82, D83, E52, E58
Keywords: Central bank transparency