Signaling in a Global Game: Coordination and Policy Traps

@article{Angeletos2002SignalingIA,
  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},
  year={2002},
  volume={114},
  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… 
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