The Social Value of Information: A Test of a Beauty and Non-Beauty Contest
Thomas Lustenberger and Enzo Rossi
D8, E43, E52, E58, G1, G29
Value of information, beauty contest, interest rate forecasts, bond yield forecasts, strategic forecasts, central bank transparency, forward guidance
We develop and apply a procedure to test the welfare implications of a beauty and non-beauty contest based on survey forecasts of interest rates and yields in a large country sample over an extended period of time. In most countries, interest-rate forecasts are unbiased and consistent with both models, but are rarely supported by yield forecasts. In half of the countries, a higher precision of public information regarding interest rates increases welfare. During forward guidance, public information is less precise than private information.