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The Pros and Cons of Higher Transparency: The Case of Speculative Attacks

  • Jean-Pierre Allegret

    ()

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Camille Cornand

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Financial Market Group R 410 - London School of Economics and Political Sciences)

The aim of this paper is to evaluate to what extent more transparency can reduce the occurrence of speculative attacks. It proposes a survey of the literature about the pros and cons of transparency on the exchange rate market, which is one of the main pillars of the new international financial architecture. The effects of transparency are shown to be ambiguous both from a theoretical and empirical point of views. However, the imperfect connection resulting from the confrontation between theory and empirics suggests that some new insights are necessary in order to better catch stylised facts on the one hand and to better evaluate the theory on the other, as has been done in recent literature. This leads to new proposals for economic and informational policies.

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Paper provided by HAL in its series Post-Print with number halshs-00137469.

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Date of creation: 2006
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Publication status: Published, Recherches Economiques de Louvain, 2006, 72, 3, 215-246
Handle: RePEc:hal:journl:halshs-00137469
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00137469/en/
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  1. Stephen Morris, 2004. "Coordination, Communication and Common Knowledge: A Retrospective on the Electronic Mail Game," Yale School of Management Working Papers ysm340, Yale School of Management.
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  14. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  15. Christian Hellwig & Arijit Mukherji, 2005. "Financial Crises and Interest Rates," 2005 Meeting Papers 172, Society for Economic Dynamics.
  16. Sbracia, Massimo & Zaghini, Andrea, 2001. "Expectations and information in second generation currency crises models," Economic Modelling, Elsevier, vol. 18(2), pages 203-222, April.
  17. Rodrigo O. Valdés & Ilan Goldfajn, 1997. "Are Currency Crises Predictable?," IMF Working Papers 97/159, International Monetary Fund.
  18. Christian Hellwig, 2002. "Imperfect Common Knowledge of Preferences in Global Coordination Games (October 2002)," UCLA Economics Online Papers 211, UCLA Department of Economics.
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  20. Catherine A. Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? a Test," IMF Working Papers 98/154, International Monetary Fund.
  21. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March.
  22. Rosemarie Nagel & Antonio Cabrales & Roc Armenter, 2002. "Equilibrium selection through incomplete information in coordination games: An experimental study," Economics Working Papers 601, Department of Economics and Business, Universitat Pompeu Fabra.
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  24. Bensaid, Bernard & Jeanne, Olivier, 1997. "The instability of fixed exchange rate systems when raising the nominal interest rate is costly," European Economic Review, Elsevier, vol. 41(8), pages 1461-1478, August.
  25. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  26. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
  27. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
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  29. Regina M. Anctil & John Dickhaut & Chandra Kanodia & Brian Shapiro, 2004. "Information Transparency and Coordination Failure: Theory and Experiment," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 159-195, 05.
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