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Speculative Attack and Informational Structure: an Experimental Study

Listed author(s):
  • Camille Cornand

    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

This paper addresses the question of whether public information destabilises the economy in the context of signals of different nature. We present an experimental evaluation of the speculative attack game of Morris and Shin (1998). Our objective is twofold: to evaluate whether public information destabilises 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.

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File URL: https://halshs.archives-ouvertes.fr/halshs-00360088/document
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Paper provided by HAL in its series Post-Print with number halshs-00360088.

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Date of creation: 2006
Publication status: Published in Review of International Economics, Wiley, 2006, 14 (5), pp. 797-817
Handle: RePEc:hal:journl:halshs-00360088
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00360088
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  1. Metz, Christina E., 2000. "Private and public information in self-fulfilling currency crises," Research Notes 00-7, Deutsche Bank Research.
  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. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
  4. 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.
  5. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
  6. Sbracia, Massimo & Zaghini, Andrea, 2001. "Expectations and information in second generation currency crises models," Economic Modelling, Elsevier, vol. 18(2), pages 203-222, April.
  7. Frank Heinemann, 2002. "Exchange-rate Attack as a Coordination Game: Theory and Experimental Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 18(4), pages 462-478.
  8. Morris, Stephen & Shin, Hyun Song, 2004. "Coordination risk and the price of debt," European Economic Review, Elsevier, vol. 48(1), pages 133-153, February.
  9. Antonio Cabrales & Rosemarie Nagel & Roc Armenter, 2007. "Equilibrium selection through incomplete information in coordination games: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(3), pages 221-234, September.
  10. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09.
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