Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders

Giancarlo Corsetti, Amil Dasgupta, Stephen Morris and Hyun Song Shin

The Review of Economic Studies, 2004, vol. 71, issue 1, 87-113

Abstract: Do large investors increase the vulnerability of a country to speculative attacks in the foreign exchange markets? To address this issue, we build a model of currency crises where a single large investor and a continuum of small investors independently decide whether to attack a currency based on their private information about fundamentals. Even abstracting from signalling, the presence of the large investor does make all other traders more aggressive in their selling. Relative to the case in which there is no large investor, small investors attack the currency when fundamentals are stronger. Yet, the difference can be small, or non-existent, depending on the relative precision of private information of the small and large investors. Adding signalling makes the influence of the large trader on small traders' behaviour much stronger. Copyright 2004, Wiley-Blackwell.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (158)

Downloads: (external link)
http://hdl.handle.net/10.1111/0034-6527.00277 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Does one Soros make a difference? A theory of currency crises with large and small traders (2001)
Working Paper: Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders (2001)
Working Paper: Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders (2000)
Working Paper: Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:71:y:2004:i:1:p:87-113

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().