Unique Equilibrium in a Currency Crisis Model with Heterogeneous Agents
This paper extends the currency crisis model of Morris and Shin to the case where players not only hold heterogenous beliefs but also differ in a characteristic feature such as individual transaction costs. It shows that there is a unique aggregate cut off point where the government abandons the peg which is supported by a continuum of individual switching points in the signals. The range of individual intervention levels is wide unless the noise vanishes.
|Date of creation:||Feb 2002|
|Date of revision:|
|Contact details of provider:|| Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL|
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