Prices transmit information from the informed to the uniformed, say researchers
Prices help to transmit information from informed to uninformed companies, according to a working paper published by the Bank of Italy yesterday, and in doing so reduce their aggregate demand for information on other macroeconomic variables.
In Information Acquisition and Learning from Prices over the Business Cycle, Taneli Mäkinen and Björn Ohl note that imperfect information has come to play a "prominent" role in business cycle theory, with the central theme that imperfectly informed agents
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