Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks
AbstractEven though self-fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge, we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals. This unique equilibrium depends not only on the money in criculation and the costs of speculative trading. In contrast to multiple equilibrium models, our model allows analysis of policy proposals directed at curtailing currency attacks.
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Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 126.
Length: 24 pages
Date of creation: 1996
Date of revision:
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Web page: http://www.nuff.ox.ac.uk/economics/
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Other versions of this item:
- Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-97, June.
- Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers 1687, C.E.P.R. Discussion Papers.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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