Journal article
Private and Public Information in Self-fulfilling Currency Crises



Publication Details
Authors:
Metz, C.
Publication year:
2002
Journal:
Journal of Economics
Pages range:
65-85
Volume number:
76
ISSN:
0931-8658

Abstract
This paper analyzes the implications of information dissemination on currency crises in models with self-fulfilling expectations. Following Morris and Shin (1999, 2000), we introduce noisy private and public information, so that under certain conditions for the noise parameters a unique equilibrium is derived. Comparative statics then show that if the fundamental state of the economy is good, the probability of a currency crisis decreases in the precision of public information, but increases in the precision of private information. In case of bad fundamentals, however, more precise public information increases the likelihood of a crisis, whereas more precise private information leads to a lower crisis probability.

Last updated on 2019-01-11 at 16:05