Speculative Attacks

Frank Heinemann and Gerhard Illing

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Models with multiple equilibria are a popular way to explain currency attacks. Morris and Shin (1998) have shown that, in the context of those models, unique equilibria may prevail once noisy private information is introduced. In this paper, we generalize the results of Morris and Shin to a broader class of probability distributions and show - using the technique of iterated elimination of dominated strategies - that uniqueness will hold, even if we allow for sunspots and individual uncertainty about strategic behavior of other agents. We provide a clear exposition of the logic of this model and we analyse the impact of transparency on the probability of a speculative attack. For the case of uniform distribution of noisy signals, we show that increased transparency of government policy reduces the likelihood of attacks.

JEL-codes: D82 F31 (search for similar items in EconPapers)
Date: 2002
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of International Economics 2 58(2002): pp. 429-450

Downloads: (external link)
https://epub.ub.uni-muenchen.de/13070/1/Illing_13070.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:lmu:muenar:13070

Access Statistics for this paper

More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().