Preempting Speculative Attacks Robust Predictions in a Global Game with Multiple Equilibria∗ George-Marios Angeletos MIT and NBER
نویسنده
چکیده
How do economic fundamentals, policy preferences, and market information shape optimal policy and devaluation outcomes during speculative currency crises? We address these questions in a global-game model where speculators lack common knowledge regarding the policy maker’s commitment to defending the currency. While previous work has shown that the signaling role of preemptive policy measures sustains multiple equilibria (Angeletos, Hellwig, and Pavan, 2006), here we show that a number of tight predictions emerge that are robust across all equilibria. These predictions would not have been possible under common knowledge and are obtained via a novel solution procedure that embodies the contagion effects of incomplete information while also controlling for the signaling role of policy. JEL Classification Numbers: C7, D8, E5, E6, F3.
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