Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/337465 
Year of Publication: 
2026
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 05/2026
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
This article provides a practical overview for applying the global games approach to solve models with multiple equilibria that are often used in discussions on fi- nancial and macroprudential policies. Global games offer a tractable approach to resolve multiple equilibria by introducing incomplete information, thereby yield- ing unique equilibrium predictions. The article proceeds along the lines of a simple regime change game with strategic complementarities. Starting from the canonical regime change game with homogeneous players, it extends the discus- sion to include heterogeneous groups of players and interlinkages across different institutions with different sets of players. These extensions highlight not only how strategic complementarities can amplify fragility across players and institu- tions but also how heterogeneity and interlinkages affects the design of micro- and macroprudential policy interventions. Finally, the article briefly discusses the application of global games to dynamic coordination games.
Subjects: 
Global Games
Multiple Equilibria
Coordination Games
JEL: 
C72
D82
G01
Persistent Identifier of the first edition: 
ISBN: 
978-3-98848-062-0
Document Type: 
Working Paper

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