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Speculative Attacks with Multiple Sources of Public Information

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  • Camille Cornand
  • Frank Heinemann

Abstract

We propose a speculative attack model in which agents receive multiple public signals. Diverse pieces of public information can be taken into account differently by different players and are likely to lead to different appreciations "ex post". This process defines players' expected private values of a successful attack. The main result shows that equilibrium uniqueness depends on two conditions: (i) signals are sufficiently dispersed and (ii) private beliefs about signals' relative precision differ sufficiently. We derive some implications for information dissemination policy. Transparency in this context is multidimensional: it concerns the publicity of announcements, the number of signals disclosed and their precision. Copyright © The editors of the "Scandinavian Journal of Economics" 2009 .

Suggested Citation

  • Camille Cornand & Frank Heinemann, 2009. "Speculative Attacks with Multiple Sources of Public Information," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 73-102, March.
  • Handle: RePEc:bla:scandj:v:111:y:2009:i:1:p:73-102
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    References listed on IDEAS

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    1. Christina E. Metz, 2002. "Private and Public Information in Self-fulfilling Currency Crises," Journal of Economics, Springer, vol. 76(1), pages 65-85, May.
    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.
    3. Aleh Tsyvinski & Arijit Mukherji & Christian Hellwig, 2006. "Self-Fulfilling Currency Crises: The Role of Interest Rates," American Economic Review, American Economic Association, vol. 96(5), pages 1769-1787, December.
    4. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
    5. 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 587-597, June.
    6. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
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    8. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
    9. Iván Werning & George-Marios Angeletos, 2006. "Crises and Prices: Information Aggregation, Multiplicity, and Volatility," American Economic Review, American Economic Association, vol. 96(5), pages 1720-1736, December.
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    12. Emre Ozdenoren & Kathy Yuan, 2008. "Feedback Effects and Asset Prices," Journal of Finance, American Finance Association, vol. 63(4), pages 1939-1975, August.
    13. Axel Lindner, 2006. "Does Transparency of Central Banks Produce Multiple Equilibria on Currency Markets?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 1-14, March.
    14. Jack High (ed.), 2001. "Competition," Books, Edward Elgar Publishing, number 1751.
    15. Blinder, Alan S & Morgan, John, 2005. "Are Two Heads Better than One? Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 789-811, October.
    16. Christina E. Bannier & Frank Heinemann, 2005. "Optimal Transparency and Risk-Taking to Avoid Currency Crises," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 374-374, September.
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    Cited by:

    1. Daniëls, Tijmen R. & Jager, Henk & Klaassen, Franc, 2011. "Currency crises with the threat of an interest rate defence," Journal of International Economics, Elsevier, vol. 85(1), pages 14-24, September.
    2. 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.
    3. repec:eee:macchp:v2-1065 is not listed on IDEAS
    4. Jean-Marc Tallon, 2006. "Incertitude stratégique et sélection d'équilibre : deux applications," Revue d'économie industrielle, De Boeck Université, vol. 0(2), pages 6-6.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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