He explains that if a central banker’s views on the economy are too revealing, traders will make the error of blindly following this advice, because they know that it will strongly influence stock markets. As a result, they may neglect very good sources of more private information, such as high-quality reports produced by their own companies.

Professor Wallace argues that providing “something in between full information and no information” on current economic conditions are the best tactics in helping financial stability.

Recently joining our Department of Economics, Professor Wallace is an expert on game theory – that is, the science of working out how people act and react to each other in complex situations where there are at least two people involved. His theory of a 'value in vagueness' he feels can apply to any area of public life where the person giving the information knows that the person receiving it is likely to over-respond to precise information, or even vice versa.

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