Unique Equilibrium in a Currency Crisis Model with Heterogeneous Agents

Gerald Pech

No 214, CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: 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.

Keywords: global games; currency crisis (search for similar items in EconPapers)
JEL-codes: D82 F31 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:0214

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