We explore the role of expectations in second generation currency crisis models, proving that sudden shifts in speculators' beliefs can trigger currency devaluations, even without any sizable worsening in the fundamentals. In our incomplete information game, mean-preserving changes in speculators' expectations may drive agents to a unique equilibrium with a self-ful lling attack. In particular, our model supports the thesis that ,sincea suf ciently large increase in speculators' uncertainty over the fundamentals is likely to trigger a currency crisis.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Banca Italia - Servizio di Studi in its series Papers with number
391.
Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Carlsson, Hans & van Damme, Eric, 1993.
"Global Games and Equilibrium Selection,"
Econometrica,
Econometric Society, vol. 61(5), pages 989-1018, September.
[Downloadable!] (restricted)
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)