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

Guimaraes, Bernardo and Morris, Stephen (2003) Risk and wealth in a model of self-fulfilling currency attacks. Cowles Foundation Discussion Paper No. 1433. Cowles Foundation for Research in Economics, Yale University, New Haven, USA. (Unpublished)

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Abstract

Market participants' risk attitudes, wealth and portfolio composition in°uence their positions in a pegged foreign currency and, therefore, may have important e®ects on the sustainability of currency pegs. We analyze such e®ects 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 the onset and timing of currency crises. 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: Monograph (Working Paper)
Official URL: http://cowles.econ.yale.edu/P/cd/cfdpmain.htm
Additional Information: © 2003 Bernado Guimaraes and Stephen Morris
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
F - International Economics > F3 - International Finance
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
Identification Number: Cowles Foundation Discussion Paper No. 1433
Date Deposited: 09 May 2008 14:47
URL: http://eprints.lse.ac.uk/4802/

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