The Role of Information Disclosure and Uncertainty in the 1994/95 Mexican Peso Crisis: Empirical Evidence

Christina Bannier

Review of International Economics, 2006, vol. 14, issue 5, 883-909

Abstract: This paper analyzes the role that the distribution of information played during the Mexican peso crisis 1994/95. In accordance with theoretical models, we find that, first, an improvement in the mean of posterior beliefs about economic fundamentals generally reduced speculative pressures. Secondly, the standard deviation of beliefs as a measure of information disparity did not significantly influence traders’ behavior. Information disparity did have a significant impact, however, when combined with the mean of beliefs. The combined effect, moreover, allows a tentative distinction between private or public information having dominated posterior beliefs. In this respect, thirdly, our analysis points to public information having driven speculative pressures.

Date: 2006
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