The Role of Information Disparity in the Mexican Peso Crisis 1994/95: Empirical Evidence
AbstractIn the Mexican Peso crisis 1994/95, the lack of readily available information, particularly regarding monetary aggregates, has often been commented on. This paper scrutinizes the events and analyzes empirically whether information disparities with respect to economic fundamentals attributed to triggering the crisis. Using historical forecast data collected by Consensus Economics, it is shown that uncertainties as measured by the forecast variation played a significant role in explaining the pressure on the fixed Peso rate. This effect is additional to the one that actual and expected fundamentals had on the exchange rate pressure. Furthermore, the impact of information disparity is found to be contingent on the prevailing market sentiment. For the Mexican case it even seems that the central bank’s strategy of not publicly disclosing information was detrimental especially because the market was generally optimistic with regard to the monetary development.
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Bibliographic InfoPaper provided by University of Kassel, Institute of Economics in its series Discussion Papers in Economics with number 44/03.
Length: 26 pages
Date of creation: Feb 2003
Date of revision:
Publication status: Published in Review of International Economics, Vol. 14 (2006), Issue 5, S. 1-27.
Currency Crisis; Speculative Attack; Private and Public Information; Transparency;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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