Financial Prices and Equilibrium Uniqueness In Global Games Models of Crises

Giacomo Rondina and Myungkyu Shim
Additional contact information
Giacomo Rondina: University of California, San Diego

No 2025rwp-243, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: We establish novel conditions under which a unique equilibrium exists in a global game model of crises, following Morris and Shin (1998), even in the presence of public information conveyed through financial prices, as in Angeletos and Werning (2006). Our analysis identifies a previously unexplored interaction between strategic uncertainty in coordination games and the informational role of financial markets: as the precision of private signals increases, strategic uncertainty intensifies, leading to a reduction in the information aggregated by financial prices. Leveraging this insight, we demonstrate that when private signals are sufficiently precise, the uniqueness result of Morris and Shin (1998) remains valid, despite the endogenous adjustments in the public information content of financial prices. Our findings contribute to the literature on information aggregation in financial markets and the robustness of equilibrium uniqueness in coordination games.

Keywords: multiple equilibria; coordination; global games; rational expectations (search for similar items in EconPapers)
JEL-codes: D80 G1 (search for similar items in EconPapers)
Pages: 28pages
Date: 2025-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://121.254.254.220/repec/yon/wpaper/2025rwp-243.pdf (application/pdf)

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:yon:wpaper:2025rwp-243

Access Statistics for this paper

More papers in Working papers from Yonsei University, Yonsei Economics Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by YERI ().