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Defending against speculative attacks: The policy maker's reputation

Listed author(s):
  • Huang, Chong
Registered author(s):

    This paper studies how speculative attacks and regime change arise from the interaction between a policy maker's reputation for defending against speculative attacks and speculators' learning of the policy maker's type. If speculators receive conditionally independent and identically distributed private signals about the policy maker's type in every period, then no matter how precise their per-period private signals are, there can be no equilibrium with attacks. If the speculators receive private signals whose precision increases as a power function of the time with the power strictly greater than two, there exist infinitely many equilibria with attacks, but this equilibrium multiplicity arises from the timing of the attacks only. In such a case, the set of status quos surviving in any equilibrium is strictly larger than in the case of a short-lived policy maker.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053117300650
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 171 (2017)
    Issue (Month): C ()
    Pages: 1-34

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    Handle: RePEc:eee:jetheo:v:171:y:2017:i:c:p:1-34
    DOI: 10.1016/j.jet.2017.06.003
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    11. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142 World Scientific Publishing Co. Pte. Ltd..
    12. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2006. "Signaling in a Global Game: Coordination and Policy Traps," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 452-484, June.
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    15. Wiseman, Thomas, 2009. "Reputation and exogenous private learning," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1352-1357, May.
    16. Itay Goldstein & Chong Huang, 2016. "Bayesian Persuasion in Coordination Games," American Economic Review, American Economic Association, vol. 106(5), pages 592-596, May.
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