Schaal, EdouardTaschereau-Dumouchel, Mathieu2025-09-262025-09-262025Schaal E, Taschereau-Dumouchel M. Coordinating business cycles. J Monet Econ. 2025 Sep 22:103829. DOI: 10.1016/j.jmoneco.2025.1038290304-3932http://hdl.handle.net/10230/71278Data de publicació electrònica: 22-09-2025We develop a quantitative theory of business cycles with coordination failures. Because of demand complementarities and increasing returns, firms seek to coordinate production and multiple equilibria arise. We use a global game approach to discipline equilibrium selection and show that the unique dynamic equilibrium exhibits multiple steady states. Coordination on high production may fail after a large transitory shock, pushing the economy in a quasi-permanent recession. Our calibrated model rationalizes various features of the 2007-2009 recession and its recovery. Government spending, while generally harmful, can increase welfare when the economy is transitioning between steady states. Other policy instruments are preferable to fix miscoordination.application/pdfeng0304-3932/© 2025 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).info:eu-repo/semantics/article2025-09-26http://dx.doi.org/10.1016/j.jmoneco.2025.103829Business cyclesImperfect informationGlobal gamesMultiple equilibriainfo:eu-repo/semantics/openAccess