This paper explores instances of coordination failures in intertemporal decisions. The context is one where agents try to interpret the behavior of others as it is revealed by market variables. The paper shows examples where, if agents postulate that market data necessarily result from actions...

We study second-best macroeconomic policies for open economies subject to intertemporal sustainability problems and where agents may face liquidity constraints. If the private sector has biased expectations of future incomes, fiscal policies could offset the consequent distortions, according to...