Unique Equilibrium in a Currency Crisis Model with Heterogeneous Agents
AbstractThis paper extends the currency crisis model of Morris and Shin to the case where players not only hold heterogenous beliefs but also differ in a characteristic feature such as individual transaction costs. It shows that there is a unique aggregate cut off point where the government abandons the peg which is supported by a continuum of individual switching points in the signals. The range of individual intervention levels is wide unless the noise vanishes.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0214.
Date of creation: Feb 2002
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global games; currency crisis;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- F31 - International Economics - - International Finance - - - Foreign Exchange
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