Information Dissemination in Currency Crises

ISBN-13: 9783540006565 / Angielski / Miękka / 2003 / 236 str.

Christina Evelies Metz

Opis

As the complexity of financial markets keeps growing, so does the need to understand the decision-making and the coordination of the exsuing actions in the marketplace. In particular, the disclosure of information to market participants and its impact on the market outcome mertis attention. This study analyses the role of private and public information in currency crises. Calls for increased dissemination of economic and policy-related information by central banks notwithstanding, the study shows that transparency is not generally conductive to preventing speculative attacks in fixed exchange-rate regimes. Rather, the role of private and public information in the market-place depencs critically on the prevailing market sentiment. The study also highlights the import of market transparency design in an environment that allows for herding and market leadership of individual speculators.

Spis treści

I The Classical Currency Crisis Models.- 1 First-Generation Model - Krugman (1979).- 1.1 The Classical First-Generation Model by Krugman (1979).- 1.2 Modifications of the First-Generation Model.- 1.2.1 Sterilizing Money-Supply Effects.- 1.2.2 Sterilization and Risk Premia.- 1.2.3 Assuming Uncertainties.- 2 Second-Generation Model - Obstfeld (1994).- 2.1 The Classical Second-Generation Model by Obstfeld (1994).- 2.2 Empirical Tests.- II Self-Fulfilling Currency Crisis Model with Unique Equilibrium - Morris and Shin (1998).- 3 Introduction.- 4 Game-Theoretic Preliminaries.- 4.1 Games, Strategies and Information.- 4.2 Solving Coordination Games.- 4.3 Equilibrium Selection in Global Games - Carlsson and van Damme (1993).- 4.4 Generalizing the Method to n-Player, 2-Action Games.- 5 Solving Currency Crisis Models in Global Games — The Morris/Shin-Model (1998).- 5.1 The Basic Model by Morris and Shin (1998).- 5.2 Interpretation of the Results.- 6 Transparency and Expectation Formation in the Basic Morris/Shin-Model (1998).- 6.1 Transparency.- 6.2 Expectation Formation.- III The Influence of Private and Public Information in Self-Fulfilling Currency Crisis Models.- 7 Introduction.- 8 Characterization of Private and Public Information.- 9 The Currency Crisis Model with Private and Public Information.- 9.1 The Structure of the Model.- 9.2 The Complete Information Case - Multiple Equilibria..- 9.3 Incomplete Public Information - Multiple Equilibria versus Unique Equilibrium.- 9.4 Incomplete Public and Private Information ¨C Unique Equilibrium.- 9.4.1 Derivation of the Unique Equilibrium.- 9.4.2 The Uniqueness Condition.- 9.5 Comparative Statics.- 9.6 Unique versus Multiple Equilibria and the Importance of Private and Public Information.- 9.7 Conclusion.- 10 Optimal Information Policy - Endogenizing Information Precision.- 10.1 The Model.- 10.2 Optimal Risk Taking and Information Policy.- 10.3 Conclusion.- IV Informational Aspects of Speculators' Size and Dynamics.- 11 Introduction.- 12 Currency Crisis Models with Small and Large Traders.- 12.1 The Basic Model with Small and Large Traders - Corsetti, Dasgupta, Morris and Shin (2001).- 12.2 Simplified Model..- 12.2.1 The Derivation of Equilibrium.- 12.2.2 Comparative Statics.- 12.3 Conclusion.- 13 Informational Cascades and Herds: Aspects of Dynamics and Time.- 13.1 Herding Behavior and Informational Cascades.- 13.1.1 The Model by Banerjee (1993).- 13.1.2 The Model by Bikhchandani, Hirshleifer and Welch (1992).- 13.2 Currency Crises as Dynamic Coordination Games ¨C Dasgupta (2001).- 13.2.1 The Static Benchmark Case.- 13.2.2 Dynamic Game with Exogenous Order.- 13.2.3 Dynamic Game with Endogenous Order.- 13.3 Large Traders in Dynamic Coordination Games.- V Testing the Theoretical Results.- 14 Introduction.- 15 Experimental Evidence.- 16 Empirical Evidence.- 16.1 The Asian Crisis 1997-98 - Empirical Tests by Prati and Sbracia (2001).- 16.2 The Mexican Peso Crisis 1994-95 - Descriptive Evidence.- 16.2.1 The Venue of the Mexican Crisis.- 16.2.2 Combining the Observations with Theoretical Results.- VI Concluding Thoughts.- Reference.