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Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model

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  • Daniel Laskar

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

We use a non-Bayesian approach to uncertainty which allows for both optimism and pessimism in a simple global game, where each signal can exhibit a bias which is ambiguous. We underline a symmetry between two models of financial crises: a liquidity crisis model, and a currency crisis model. We show that one model with pessimism becomes similar to the other model with optimism, and vice versa, which leads ambiguity to have opposite effects in the two models. We can also rationalize non-neutral effects of shifts in "market sentiment" in these models.

Suggested Citation

  • Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," PSE Working Papers hal-00811923, HAL.
  • Handle: RePEc:hal:psewpa:hal-00811923
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/hal-00811923
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    12. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    13. Daniel Laskar, 2012. "Ambiguity and Coordination in a Global. Game Model of Financial Crises," PSE Working Papers halshs-00749500, HAL.
    14. Daniel Laskar, 2012. "Ambiguity and Coordination in a Global. Game Model of Financial Crises," Working Papers halshs-00749500, HAL.
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    Keywords

    Persistence; Global game; Financial crises; Ambiguity; Optimism; Pessimism; Market sentiment ; Coordination;

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