Persuasion in Global Gameswith Application to Stress Testing

Abstract

We study robust/adversarial information design in global games of regime change. We show that the optimal policy coordinates all market participants on the same course of action. Importantly, while it removes any \strategic uncertainty," it preserves heterogeneity in \structural uncertainty". When the designer is constrained to public disclosures, we identify conditions under which the optimal policy is a \pass/fail" test, as well as conditions under which the test is monotone in the banks' fundamentals. Finally, we show that the benefits from discriminatory disclosures come from \dividing-and-conquering" the market, and relate them to the type of securities issued by the banks.