Signaling in a Global Game: Coordination and Policy Traps

  title={Signaling in a Global Game: Coordination and Policy Traps},
  author={George-Marios Angeletos and Christian Hellwig and Alessandro Pavan},
  journal={Journal of Political Economy},
  pages={452 - 484}
This paper introduces signaling in a global game so as to examine the informational role of policy in coordination environments such as currency crises and bank runs. While exogenous asymmetric information has been shown to select a unique equilibrium, we show that the endogenous information generated by policy interventions leads to multiple equilibria. The policy maker is thus trapped into a position in which self‐fulfilling expectations dictate not only the coordination outcome but also the… 

Signaling in Global Games

This paper aims to study the impact of costly and private information acquisition in global games with applications in financial crisis (e.g. bank runs, currency crisis). While exogenous asymmetric

Preempting Speculative Attacks Robust Predictions in a Global Game with Multiple Equilibria ∗

How do economic fundamentals, policy preferences, and market information shape optimal policy and devaluation outcomes during speculative currency crises? We address these questions in a global-game

Selection-free predictions in global games with endogenous information and multiple equilibria

Global games with endogenous information often exhibit multiple equilibria. In this paper we show how one can nevertheless identify useful predictions that are robust across all equilibria and that

The Signaling Role of Leaders in Global Games

How important are leaders’ actions in facilitating coordination? In this paper, we investigate their signaling role in a global games framework. A perfectly informed leader and a team of followers

Information acquisition in global games of regime change

Bayesian Persuasion in Coordination Games

We analyze a coordination game of regime change where the policy maker, who tries to increase the probability of the survival of the regime, commits ex ante to abandon the regime automatically when

Coordination of Expectations and the Informational Role of Policy

An informational role of policy arises in economies where large fluctuations are triggered by selffulfilling expectation switches between efficient "optimism" and inefficient "pessimism," a feature

Robust Predictions in Global Games with Multiple Equilibria: Defense Policies Against Currency Attacks

This paper studies defense policies in a global-game model of speculative currency attacks. Although the signaling role of policy interventions sustains multiple equilibria, a number of novel

Rules versus discretion in Central Bank communication

We study Central Bank communication in a coordination environment. We show that anything goes when the Central Bank cannot commit to a communication policy: both its most and least preferred



Coordination and Policy Traps

This paper examines the ability of a policy maker to control equilibrium outcomes in an environment where market participants play a coordination game with information heterogeneity. We consider

Rethinking Multiple Equilibria in Macroeconomic Modeling

Are beliefs as indeterminate as suggested by models with multiple equilibria? Multiplicity of equilibria arises largely as the unintended consequence of two modeling assumptions-the fundamentals are

Coordinating Coordination Failures in Keynesian Models

This paper focuses on the importance of strategic complementarities in agents’ payoff functions as a basis for macroeconomic coordination failures. Strategic complementarities arise when the optimal

Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities

The authors study a rich class of noncooperative games that includes models of oligopoly competition, macroeconomic coordination failures, arms races, bank runs, technology adoption and diffusion,

Expectation Traps and Discretion

We argue that discretionary monetary policy exposes the economy to welfare-decreasing instability. It does so by creating the potential for private expectations about the response of monetary policy

Public Information, Private Information, and the Multiplicity of Equilibria in Coordination Games

It is found that in general, the possibility of coordination is more likely to arise when the overall level of noise is low and when the public information is relatively informative, and higher-order uncertainty vanishes, as the noise in the signals disappears.

Signaling Games and Stable Equilibria

Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in

Coordinating Regime Switches

The canonical model of strategic complementarities between individual actions, which exhibits multiple equilibria under perfect information, is extended with heterogeneous agents and imperfect

Information Manipulation, Coordination and Regime Change

This paper presents a model of information and political regime change. If enough citizens act against a regime, it is overthrown. Citizens are imperfectly informed about how hard this will be and

Elections and Macroeconomic Policy Cycles

There is an extensive empirical literature on political business cycles, but its theoretical foundations are grounded in pre-rational expectations macroeconomic theory. Here we show that electoral