Growth forecasts, belief manipulation and capital markets

Frederik Lundtofte*, Patrick Leoni

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

1 Citation (Scopus)


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.

Original languageEnglish
JournalEuropean Economic Review
Pages (from-to)108-125
Number of pages18
Publication statusPublished - Oct 2014
Externally publishedYes


  • Asset pricing
  • Forecasting
  • Heterogeneous beliefs
  • Information
  • Social welfare


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