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

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

FMG Discussion Papers from Financial Markets Group

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 signaling, 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 investors, small investors attach the currency when fundamentals are stronger. Yet, the difference can be small, or null, depending on the relative precision of private information of the small and large investors. Adding signaling makes the influence of the large trader on small traders behaviour much stronger.

Date: 2001-03
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp372.pdf (application/pdf)

Related works:
Journal Article: Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders (2004)
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:fmg:fmgdps:dp372

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().