Growth forecasts, belief manipulation and capital markets

We analyze how a benevolent, privately informed government agency would optimally release information about the economy׳s growth rate when the agents hold heterogeneous beliefs. We model two types of agent: “conforming” and “dissenting.” The former has a prior that is identical to that of the government agency, whereas the latter has a prior that differs from that of the government agency. We identify both informative and uninformative equilibria. Informative equilibria are equilibria in which the government agency׳s equilibrium signal leads to a revision of beliefs. We demonstrate that the uninformative equilibria can in fact dominate the informative ones in terms of ex post social welfare.