Economics at your fingertips  

Speculator-triggered crisis and interventions

Ming Yi

Journal of Macroeconomics, 2017, vol. 52, issue C, 135-146

Abstract: This paper adds a speculator and an authority to a benchmark global game model to investigate how the speculator endangers a business or an economy, and what the authority can do about it. It is found that the existence of a speculator increases the financial system’s vulnerability by serving as a coordinating device for the investors and thus triggering the crisis. We then compare three different intervention policies imposed by the authority aiming to counteract this effect: deterring the speculator, rewarding holding investors, and eliminating the preemption motives among investors. We argue that the first method may not work because of the multiplicity problem; the second one is useless when a crisis is about to happen; the last tool works given enough effort. We also include a discussion of different intervention polices employed by governments during the 1997 Asian financial crisis to illustrate the theoretical results.

Keywords: Global game; Speculator; Authority; Intervention; 1997 Asian financial crisis (search for similar items in EconPapers)
JEL-codes: C7 D8 E5 E6 G1 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-09-29
Handle: RePEc:eee:jmacro:v:52:y:2017:i:c:p:135-146