Document Type
Discussion Paper
Publication Date
9-1-2003
CFDP Number
1433R
CFDP Revision Date
2004-11-01
CFDP Pages
31
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. We analyze such effects in a global game model of currency crises with continuous action choices. The model, solved in closed form, generates a rich set of theoretical predictions consistent with many popular and academic (unmodelled) speculations about the onset and timing of currency crises. The results extend linearly to a heterogeneous agent population.
Recommended Citation
Guimarães, Bernardo and Morris, Stephen, "Risk and Wealth in a Model of Self-Fulfilling Currency Attacks" (2003). Cowles Foundation Discussion Papers. 1708.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1708