This paper studies defense policies in a global-game model of speculative currency attacks. Although the signaling role of policy interventions sustains multiple equilibria, a number of novel predictions emerge which are robust across all equilibria. (i) The central bank intervenes by raising...

This paper examines the ability of a policy maker to control equilibrium outcomes in a global coordination game; applications include currency attacks, bank runs, and debt crises. A unique equilibrium is known to survive when the policy is exogenously fixed. We show that, by conveying...

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...

Global games of regime change-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...

In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether...

The arrival of new, unfamiliar, investment opportunities is often associated with exuberant movements in asset prices and real economic activity. During these episodes of high uncertainty, financial markets look at the real sector for signals about the profitability of the new investment...

This paper studies defense policies in a global-game model of speculative currency attacks. Although the signaling role of policy interventions sustains multiple equilibria, a number of novel predictions emerge which are robust across all equilibria. (i) The central bank intervenes by raising...

This paper analyzes equlibrium and welfare for a tractable class of economies (games) with externalities, strategic complementarity or substitutability, and heterogenous information. First, we characterize the equilibrium use of information; complementarity heightens the sensitivity of...

Global games with endogenous information often exhibit multiple equilibria. In this paper we show how one can nevertheless identify useful predictions that are robust across all equilibria and that could not have been delivered in the common-knowledge counterparts of these games. Our analysis is...