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Title:Private and public information in self-fulfilling currency crises PDF Logo
Authors:Metz, Christina E.
Issue Date:2000
Series/Report no.:Research notes in economics & statistics 00-7
Abstract:This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all equilibria but one are eliminated so that we are able to derive comparative statics and subsequent policy devices. We can show that if the a priori expected fundamental state of the economy is good, there is an incentive for the government to disseminate very precise information. However, a high precision of public information increases the danger of an attack if ex-ante expected fundamentals are bad. Moreover, we find that the influence of private information's precision is exactly the reverse.
Subjects:Currency Crises
Common Knowledge
Multiple Equilibria
JEL:F31
D82
Document Type:Working Paper
Appears in Collections:Research Notes, Deutsche Bank Research

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