Information Dynamics and Multiplicity in Global Games of Regime Change∗ George-Marios Angeletos MIT and NBER

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 bank runs, currency attacks, debt crises, and political change. We extend the static benchmark examined in the literature by allowing agents to accumulate information over time and take actions in many periods. It is shown that dynamics may lead to multiple equilibria under the same information assumptions that guarantee uniqueness in the static benchmark. Multiplicity originates in the interaction between the arrival of information over time and the endogenous change in beliefs induced by the knowledge that the regime survived past attacks. This interaction also generates interesting equilibrium properties, such as the possibility that fundamentals predict the eventual regime outcome but not the timing or the number of attacks, or that dynamics alternate between crises and phases of tranquillity without changes in fundamentals. JEL Codes: C7, D7, D8, F3.