Unique Equilibrium in a Dynamic Model of Speculative Attacks

Daniëls, Tijmen R.

doi:10.1007/s10645-009-9130-9

Cited by 4 publications

(2 citation statements)

References 22 publications

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“…Frankel and Burdzy (2005) generalize the uniqueness result allowing for seasonal and mean-reverting shocks to θ. Daniëls (2009) extends the uniqueness result to the case where θ follows a jump diffusion process and derives an expression analogous to (14) for the case of vanishing frictions. Guimaraes (2006) proposes an extension of this framework to the case of currency attacks.…”

Section: Guimaraes Et Almentioning

confidence: 78%

Dynamic coordination with timing frictions: Theory and applications

Guimarães¹,

Machado

Pereira

2020

J Public Economic Theory

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We present a general framework of dynamic coordination with timing frictions. A continuum of agents receive random chances to choose between two actions and remain locked in the selected action until their next opportunity to reoptimize. The instantaneous utility from each action depends on an exogenous fundamental that moves stochastically and on the mass of agents currently playing each action. Agents' decisions are strategic complements and history matters. We review some key theoretical results and show a general method to solve the social planner's problem. We then review applications of this framework to different economic problems: network externalities, statistical discrimination, and business cycles. The positive implications of these models are very similar, but the social planner's solution points to very different results for efficiency in each case. Last, we review extensions of the framework that allow for endogenous hazard rates and ex ante heterogeneous agents.

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Section: Guimaraes Et Almentioning

confidence: 78%

Dynamic coordination with timing frictions: Theory and applications

Guimarães¹,

Machado

Pereira

2020

J Public Economic Theory

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“…This paper builds on the model of Frankel and Pauzner (2000). They base their analysis on a model of sectorial choice (along the lines of Matsuyama (1991)), but their framework has been used to analyze location choices (Frankel and Pauzner (2002)), carry trades and speculation (Plantin and Shin (2006)), speculative attacks (Daniëls (2009)) and investment and business cycles (Frankel and Burdzy (2005), Guimaraes and Machado (2014)). The model of currency attacks in Guimaraes (2006) and the model of debt runs in He and Xiong (2012) employ similar timing frictions.…”

Section: Introductionmentioning

confidence: 99%

Dynamic coordination among heterogeneous agents

Guimarães

Pereira

2017

Journal of Mathematical Economics

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We study a dynamic model of coordination with timing frictions and payoff heterogeneity. There is a unique equilibrium, characterized by thresholds that determine the choices of each type of agent. We characterize equilibrium for the limiting cases of vanishing timing frictions and vanishing shocks to fundamentals. A lot of conformity emerges: despite payoff heterogeneity, agents' equilibrium thresholds partially coincide as long as there exists a set of beliefs that would make this coincidence possible-though they never fully coincide. In case of vanishing frictions, the economy behaves almost as if all agents were equal to an average type. Conformity is not inefficient. The efficient solution would have agents following others even more often and giving less importance to the fundamental.

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