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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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Identification Number: 10.1016/j.jmoneco.2007.07.005


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
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Additional Information: © 2007 Elsevier B.V.
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
JEL classification: 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
Date Deposited: 08 May 2008 16:08
Last Modified: 20 Aug 2021 01:40

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