Speculative Attacks: A Laboratory Study in Continuous Time
Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 07/2009
Journal of International Money and Finance, Vol. 28, No. 6, 2009
33 Pages Posted: 12 Mar 2009 Last revised: 31 Oct 2022
There are 2 versions of this paper
Speculative Attacks: A Laboratory Study in Continuous Time
Speculative Attacks: A Laboratory Study in Continuous Time
Date Written: February 27, 2009
Abstract
This working paper was written by Yin-Wong Cheung (University of California, Santa Cruz) and Daniel Friedman (University of California, Santa Cruz ).
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.
Keywords: Currency Crisis, Speculative Attack, Laboratory Experiment, Coordination Game, Pre-emption, Large Player
JEL Classification: F30, C73, C92
Suggested Citation: Suggested Citation
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