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Speculative Attacks: A Laboratory Study in Continuous TimeYin-Wong CheungCity University of Hong Kong - Department of Economics & Finance; University of California at Santa Cruz - Department of Economics Daniel FriedmanUniversity of California, Santa Cruz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) February 27, 2009 HKIMR Working Paper No.7/2009 Abstract: We examine speculative attacks in a controlled laboratory environment featuring continuous time, size asymmetries, and varying amounts of public information. Attacks succeeded in 233 of 344 possible cases. When speculators have symmetric size and access to information: (a) weaker fundamentals increase the likelihood of successful speculative attacks and hasten their onset, and (b) contrary to some theory, success is enhanced by public access to information about either the net speculative position or the fundamentals. The presence of a larger speculator further enhances success, and experience with large speculators increases small speculators' response to the public information. However, giving the large speculator increased size or better information does not significantly strengthen his impact.
Number of Pages in PDF File: 33 Keywords: Currency Crisis, Speculative Attack, Laboratory Experiment, Coordination Game, Pre-emption, Large Player JEL Classification: F30, C73, C92 working papers seriesDate posted: March 12, 2009Suggested CitationContact Information
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