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Private and Public Information in Self-Fulfilling Currency Crises

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Author Info
Christina E. Bannier (J.W. Goethe-University of Frankfurt)

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Abstract

This paper analyses the implications of information dissemination on currency crises in models with self-fulfilling expectations. Following Morris/Shin (1999, 2000), we introduce noisy private and public information, so that under certain conditions for the noise parameters a unique equilibrium is derived. Comparative statics then show that if the fundamental state of the economy is good, the probability of a currency crisis decreases in the precision of public information, but increases in the precision of private information. In case of bad fundamentals, however, more precise public information increases the likelihood of a crisis, whereas more precise private information leads to a lower crisis probability.

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File URL: http://129.3.20.41/eps/if/papers/0309/0309006.pdf
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Publisher Info
Paper provided by EconWPA in its series International Finance with number 0309006.

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Length: 345 pages
Date of creation: 25 Sep 2003
Date of revision:
Handle: RePEc:wpa:wuwpif:0309006

Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 345,395,4323247 ; figures: included/request from author/draw your own
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Related research
Keywords: currency crises; self-fulfilling expectations; private and public information; multiple equilibria;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
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.:

  1. Giancarlo Corsetti & Amil Dasgupta & Stephen Morris & Hyun Song Shin, 2004. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," Review of Economic Studies, Blackwell Publishing, vol. 71(1), pages 87-113, 01. [Downloadable!] (restricted)
    Other versions:
  2. Hellwig, Christian, 2002. "Public Information, Private Information, and the Multiplicity of Equilibria in Coordination Games," Journal of Economic Theory, Elsevier, vol. 107(2), pages 191-222, December. [Downloadable!] (restricted)
  3. Maurice Obstfeld, 1997. "Models of Currency Crises with Self-Fulfilling Features," NBER Working Papers 5285, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Shin, Hyun Song & Morris, Stephen, 2000. "Welfare effects of public information," Discussion Paper Series 1: Economic Studies 2000,07, Deutsche Bundesbank, Research Centre. [Downloadable!]
  5. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August. [Downloadable!] (restricted)
  6. Michael Chui & Prasanna Gui & Andrew G Haldane, . "Sovereign liquidity crises: analytics and implications for public policy," Bank of England working papers 121, Bank of England. [Downloadable!]
  7. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
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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.)

  1. Christina E. Bannier, 2003. "Privacy or Publicity - Who Drives the Wheel?," Game Theory and Information 0309006, EconWPA. [Downloadable!]
  2. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December. [Downloadable!]
  3. Aitor Erce-Domínguez, 2006. "Using standstills to manage sovereign debt crises," Banco de España Working Papers 0636, Banco de España. [Downloadable!]
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