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Currency Attacks with Information Correlation

Author

Listed:
  • Rongyu Wang

    (School of Business, Qilu Institute of Technology and School of Economics, University of Edinburgh)

Abstract

This study introduces information correlation between small traders and a large trader to study the issue of currency attacks. First, I find that in the strategic interaction between small traders and the large trader, they do not necessarily coordinate with each other. Strategic substitutes may be present under certain circumstances. Second, signals below a certain threshold are not destined to cause a currency attack. Third, information correlation creates different levels of desire for coordination. Comparative statics analysis provides fresh insights into how information structure and government policy affect the difficulty of undertaking currency attacks.

Suggested Citation

  • Rongyu Wang, 2025. "Currency Attacks with Information Correlation," Annals of Economics and Finance, Society for AEF, vol. 26(2), pages 825-852, November.
    • Handle: RePEc:cuf:journl:y:2025:v:26:i:2:wang
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    References listed on IDEAS

    as
    1. Stephen Morris & Muhamet Yildiz, 2019. "Crises: Equilibrium Shifts and Large Shocks," American Economic Review, American Economic Association, vol. 109(8), pages 2823-2854, August.
    2. Nikola A. Tarashev, 2007. "Speculative Attacks and the Information Role of the Interest Rate," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 1-36, March.
    3. Chanelle Duley & Prasanna Gai, 2023. "Macroeconomic tail risk, currency crises and the inter‐war gold standard," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1551-1582, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    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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