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Speculative Attacks and Informational Structure: an Experimental Study

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  • Camille Cornand
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    Abstract

    This paper addresses the question of whether public information destabilizes the economy in the context of signals of a different nature. We present an experimental evaluation of the speculative attack game of Morris and Shin (1998 ). Our objective is two-fold: to evaluate whether public information destabilizes the economy within a context of signals of different nature and to enlarge upon the results of Heinemann, Nagel, and Ockenfels (2004 ) (HNO). Our evidence suggests that in sessions with both private and common signals, the fact that the common signal plays a focal role enhances the central bank's welfare: it reduces the probability of crisis and increases its predictability. Therefore, we raise doubts about the policy implications of HNO's findings. The new policy lesson is that the central bank has more control over the beliefs of traders if it discloses one clear signal when agents also get private information from other sources. Copyright � 2006 The Authors; Journal compilation � 2006 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of International Economics.

    Volume (Year): 14 (2006)
    Issue (Month): 5 (November)
    Pages: 797-817

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    Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:797-817

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    Cited by:
    1. Camille Cornand & Franck Heinemann, 2013. "Measuring Agents’ Reaction to Private and Public Information in Games with Strategic Complementarities," Working Papers 1341, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
    2. Camille Cornand & Frank Heinemann, 2014. "Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities," Working Papers halshs-00925018, HAL.
    3. Yin-Wong Cheung & Daniel Friedman, 2009. "Speculative Attacks: A Laboratory Study in Continuous Time," Working Papers 072009, Hong Kong Institute for Monetary Research.
    4. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Jun 2014.
    5. Romain Baeriswyl & Camille Cornand, 2012. "Reducing overreaction to central banks' disclosures:theory and experiment," Working Papers 2012-08, Swiss National Bank.
    6. Trabelsi, Emna, 2010. "Central bank communication: fragmentation as an engine for limiting the publicity degree of information," MPRA Paper 26647, University Library of Munich, Germany.

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