The Role of (Non)transparency in a Currency Crisis Model

  title={The Role of (Non)transparency in a Currency Crisis Model},
  author={Kenneth S. Chan and Y. Stephen Chiu},
This paper extends the work by Morris and Shin (1998) where multiple equilibria in the self-fulfilling currency attack models can be reduced to a unique equilibrium when agents observe fundamentals privately with small errors. We find that under a more general specification with realistic parameters, noisy private observations are generally insufficient to prevent the multiplicity of equilibria. The pivotal role played by the transparency of fundamentals/policies in currency crisis is also… CONTINUE READING