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The Role of Information Disclosure and Uncertainty in the 1994/95 Mexican Peso Crisis: Empirical Evidence

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  • Christina E. Bannier

Abstract

This paper analyzes the role that the distribution of information played during the Mexican peso crisis 1994/95. In accordance with theoretical models, we find that, first, an improvement in the mean of posterior beliefs about economic fundamentals generally reduced speculative pressures. Secondly, the standard deviation of beliefs as a measure of information disparity did not significantly influence traders' behavior. Information disparity did have a significant impact, however, when combined with the mean of beliefs. The combined effect, moreover, allows a tentative distinction between private or public information having dominated posterior beliefs. In this respect, thirdly, our analysis points to public information having driven speculative pressures. Copyright © 2006 The Author; Journal compilation © 2006 Blackwell Publishing Ltd.

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  • Christina E. Bannier, 2006. "The Role of Information Disclosure and Uncertainty in the 1994/95 Mexican Peso Crisis: Empirical Evidence," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 883-909, November.
  • Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:883-909
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    References listed on IDEAS

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    1. Jeffrey A. Frankel & Sergio L. Schmukler, 1996. "Country Fund Discounts, Asymmetric Information and the Mexican Crisis of 1994: Did Local Residents Turn Pessimistic Before International Investors?," NBER Working Papers 5714, National Bureau of Economic Research, Inc.
    2. Sebastian Edwards, 1997. "The Mexican Peso Crisis? How Much Did We Know? When Did We Know It?," NBER Working Papers 6334, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jean-Pierre Allegret & Camille Cornand, 2006. "The pros and cons of higher transparency: the case of speculative attacks," Recherches économiques de Louvain, De Boeck Université, vol. 72(3), pages 215-246.
    2. repec:eee:macchp:v2-1065 is not listed on IDEAS
    3. Prati, Alessandro & Sbracia, Massimo, 2010. "Uncertainty and currency crises: Evidence from survey data," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 668-681, September.
    4. Prakash Kannan & Fritzi Köhler-Geib, 2009. "The Uncertainty Channel of Contagion," IMF Working Papers 09/219, International Monetary Fund.
    5. Franklin Allen & Elena Carletti, 2007. "Banks, Markets and Liquidity," RBA Annual Conference Volume,in: Christopher Kent & Jeremy Lawson (ed.), The Structure and Resilience of the Financial System Reserve Bank of Australia.

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