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Risk and wealth in a model of self-fulfilling currency attacks

Guimaraes, Bernardo and Morris, Stephen (2007) Risk and wealth in a model of self-fulfilling currency attacks. Journal of Monetary Economics, 54 (8). pp. 2205-2230. ISSN 0304-3932

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Abstract

Market participants’ risk attitudes, wealth and portfolio composition influence their positions in a pegged foreign currency and, therefore, may have important effects on the sustainability of currency pegs. This paper analyzes such effects in a global game model of currency crises with continuous action choices, generating a rich set of theoretical comparative static predictions related to often discussed but rarely modelled accounts of currency attacks. The model can be solved in closed form and the methods could be used to study other economic issues in which coordination and risk aversion play important roles.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/03043...
Additional Information: © 2007 Elsevier B.V.
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 08 May 2008 16:08
URL: http://eprints.lse.ac.uk/4756/

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