Speculative Attacks and Informational Structure: an Experimental Study

This paper addresses the question of whether public information destabilizes the economy in the context of signals of a different nature. We present an experimental evaluation of the speculative attack game of Morris and Shin (1998). Our objective is two-fold: to evaluate whether public information destabilizes the economy within a context of signals of different nature and to enlarge upon the results of Heinemann, Nagel, and Ockenfels (2004) (HNO). Our evidence suggests that in sessions with both private and common signals, the fact that the common signal plays a focal role enhances the central bank's welfare: it reduces the probability of crisis and increases its predictability. Therefore, we raise doubts about the policy implications of HNO's findings. The new policy lesson is that the central bank has more control over the beliefs of traders if it discloses one clear signal when agents also get private information from other sources.