Regulating Systemic Risk through Transparency: Trade-Offs in Making Data Public

Public or partial disclosure of financial data is a key element in the design of a new regulatory environment. We study the costs and benefits of higher public access to financial data and analyze qualitatively how frequency, disclosure lag and granularity of such open data can be chosen to maximize welfare, depending on the relative magnitude of economic frictions. We lay out a simple framework to choose optimal transparency of financial data and, in doing so, address the following questions: At what frequency should data be collected and made available? How long should the regulator wait before releasing data? And, at what level of detail should information be released?