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Signaling in a Global Game: Coordination and Policy Traps Author info | Abstract | Publisher info | Download info | Related research | Statistics George-Marios Angeletos
Christian Hellwig
Alessandro Pavan
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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 optimal policy. This result does not rely on the freedom to choose out-of-equilibrium beliefs, nor on the policy being a public signal; it may obtain even if the policy is observed with idiosyncratic noise.
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Article provided by University of Chicago Press in its journal Journal of Political Economy .
Volume (Year): 114 (2006)
Issue (Month): 3 (June)
Pages: 452-484
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Handle: RePEc:ucp:jpolec:v:114:y:2006:i:3:p:452-484Contact details of provider: Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637 Fax: (773) 753-0811 Email: Web page: http://www.journals.uchicago.edu/JPE/home.html
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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"“Large” vs. “small” players: A closer look at the dynamics of speculative attacks ,"
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"Policy in a Global Coordination Game: Multiplicity vs. Robust Predictions (November 2006, with Marios Angeletos and Alessandro Pavan) ,"
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