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Title:Information dynamics and equilibrium multiplicity in global games of regime change PDF Logo
Authors:Angeletos, George-Marios
Hellwig, Christian
Pavan, Alessandro
Issue Date:2004
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1395
Abstract:Global games of regime change that is, coordination games of incomplete information in which a status quo is abandoned once a sufficiently large fraction of agents attacks it have been used to study crises phenomena such as currency attacks, bank runs, debt crises, and political change. We extend the static benchmark examined in the literature by allowing agents to accumulate information over time and take actions in many periods. It is shown that dynamics may lead to multiple equilibria under the same information assumptions that guarantee uniqueness in the static benchmark. Multiplicity originates in the interaction between the arrival of information over time and the endogenous change in beliefs induced by the knowledge that the regime survived past attacks. This interaction also generates interesting equilibrium properties, such as the possibility that fundamentals predict the eventual regime outcome but not the timing or the number of attacks, or that dynamics alternate between crises and phases of tranquillity without changes in fundamentals.
Subjects:Global games
coordination
multiple equilibria
information dynamics
crises
JEL:C7
D7
D8
F3
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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