Currency crises and uncertainty about fundamentals

Alessandro Prati and Massimo Sbracia ()

No 446, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research Department

Abstract: This paper extends some theoretical results of Morris and Shin (1998) concerning the role of uncertainty about fundamentals in currency crises and tests their empirical relevance using a novel approach based on the distribution of survey expectations. Econometric evidence from the Asian crisis confirms the prediction that the dispersion of expectations affects the probability of a speculative attack and that the sign of this effect depends on whether expected fundamentals are "good" or "bad". Extensive robustness checks support the findings.

Keywords: speculative attack; exchange rate crisis; public and private information (search for similar items in EconPapers)
JEL-codes: F31 D84 D82 (search for similar items in EconPapers)
Date: 2002-07
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Related works:
Working Paper: Currency Crises and Uncertainty About Fundamentals (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:bdi:wptemi:td_446_02

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