Accounting for Crises

Venky Nagar and Gwen Yu

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 3, 184-213

Abstract: We provide among the first empirical evidence, consistent with recent macro global game crisis models, that shows that the precision of public signals can coordinate crises. In these models, self-fulfilling crises independent of fundamentals can occur only when publicly disclosed signals of fundamentals have high precision; poor fundamentals are the sole driver of crises only in low precision settings. We exploit a key publicly disclosed signal of fundamentals, namely accounting data, for 68 currency and systemic banking crises in 17 countries. We find that precrisis accounting signals of fundamentals are significantly lower only in low-precision countries.

JEL-codes: D82 E44 G01 G14 G21 L25 M40 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.3.184
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Citations: View citations in EconPapers (6)

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