Private and public information in self-fulfilling currency crises

Christina E. Metz
Authors registered in the RePEc Author Service: Christina Bannier

No 00-7, Research Notes from Deutsche Bank Research

Abstract: This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all equilibria but one are eliminated so that we are able to derive comparative statics and subsequent policy devices. We can show that if the a priori expected fundamental state of the economy is good, there is an incentive for the government to disseminate very precise information. However, a high precision of public information increases the danger of an attack if ex-ante expected fundamentals are bad. Moreover, we find that the influence of private information's precision is exactly the reverse.

Keywords: Currency Crises; Common Knowledge; Multiple Equilibria (search for similar items in EconPapers)
JEL-codes: D82 F31 (search for similar items in EconPapers)
Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Private and Public Information in Self-Fulfilling Currency Crises (2003)
Journal Article: Private and Public Information in Self-fulfilling Currency Crises (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dbrrns:007

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