Expectations and Information in Second Generation Currency Crises Models

Massimo Sbracia and Andrea Zaghini

Working Papers from Banca Italia - Servizio di Studi

Abstract: We explore the role of expectations in second generation currency crisis models, proving that sudden shifts in speculators' beliefs can trigger currency devaluations, even without any sizable worsening in the fundamentals. In our incomplete information game, mean-preserving changes in speculators' expectations may drive agents to a unique equilibrium with a self-ful lling attack. In particular, our model supports the thesis that ,sincea suf ciently large increase in speculators' uncertainty over the fundamentals is likely to trigger a currency crisis.

Keywords: CURRENCIES; EXPECTATIONS; ECONOMIC MODELS (search for similar items in EconPapers)
JEL-codes: D82 F31 F33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2000
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Expectations and information in second generation currency crises models (2001)
Working Paper: Expectations and information in second generation currency crises models (2000)
Working Paper: Expectations and Information in Second Generation Currency Crises Models (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:banita:391

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