On the Dynamics of Information, Coordination and Regime Change

Alessandro Pavan, George-Marios Angeletos and Christian Hellwig

No 270, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: This paper examines how the dynamics of information influences the dynamics of coordination in an environment with strategic complementarities and heterogeneous expectations. We consider a simple dynamic global game of regime change, in which the status quo is abandoned when a sufficiently large fraction of agents attacks it. Applications include bank runs, currency crises, revolutions, and political reforms. We show that the occurrence of coordinated attacks and the timing of regime change depend, not only on the evolution of information, but also on arbitrary self-fulfilling expectations. Despite the indeterminacy in short-run dynamics, long-run outcomes are driven by fundamentals: There is a unique threshold below which regime change is inevitable in the long run. Moreover, all equilibrium paths are characterized by the succession of short phases of high risk of a crisis and long phases of tranquility, which may explain why phenomena such as speculative attacks and revolutions appear as spikes in economic or social activity.

Keywords: Coordination; Dynamics; Regime Change; Global Games (search for similar items in EconPapers)
JEL-codes: C7 D7 D8 F3 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-afr and nep-dge
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://faculty.econ.nwu.edu/faculty/pavan/Dynamics.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to faculty.econ.nwu.edu:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:270

Access Statistics for this paper

More papers in 2004 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().