Journal Article

Exchange‐rate Attack as a Coordination Game: Theory and Experimental Evidence

Frank Heinemann

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 18, issue 4, pages 462-478
Published in print December 2002 | ISSN: 0266-903X
Published online December 2002 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/18.4.462
Exchange‐rate Attack as a Coordination Game: Theory and Experimental Evidence

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This paper compares theoretical predictions for a coordination game, used to explain the onset of a currency crisis, with observations from laboratory experiments. Theories that assume full rationality suggest that public information may destabilize an economy by creating self‐fulfilling belief equilibria, while private information leads to a unique equilibrium. In experiments, differences in behaviour for these two kinds of information are small. Public information increases efficiency and coordination among players, and there is no evidence for destabilizing effects owing to self‐fulfilling beliefs.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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