NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination

George-Marios Angeletos, Chen Lian

NBER Working Paper No. 22297
Issued in June 2016
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

This chapter studies how incomplete information helps accommodate frictions in coordination, leading to novel insights on the joint determination of expectations and macroeconomic outcomes. We review and synthesize recent work on global games, beauty contests, and their applications. We elaborate on the distinct effects of strategic uncertainty relative to fundamental uncertainty. We demonstrate the potential fragility of workhorse macroeconomic models to relaxations of common knowledge; the possibility of operationalizing the notions of “coordination failure” and “animal spirits” in a manner that unifies unique- and multiple-equilibrium models; and the ability of incomplete information to offer a parsimonious explanation of important empirical regularities. We provide a general treatment of these ideas, as well as specific applications in the context of business cycles, financial crises, and asset pricing.

download in pdf format
   (1818 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22297

Users who downloaded this paper also downloaded* these:
Backus w4553 The Japanese Trade Balance: Recent History and Future Prospects
West and Newey t0144 Automatic Lag Selection in Covariance Matrix Estimation
La Porta, Lopez-de-Silanes, Shleifer, and Vishny w5879 Legal Determinants of External Finance
Cavagnaro, Sensoy, Wang, and Weisbach w22547 Measuring Institutional Investors’ Skill from Their Investments in Private Equity
Hanlon w21647 Pollution and Mortality in the 19th Century
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us