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Speculative Attacks: A Laboratory Study in Continuous Time

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Author Info
Yin-Wong Cheung (University of California, Santa Cruz)
Daniel Friedman (University of California, Santa Cruz)

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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.

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Publisher Info
Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 072009.

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Length: 33 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:hkm:wpaper:072009

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Related research
Keywords: Currency Crisis; Speculative Attack; Laboratory Experiment; Coordination Game; Pre-emption; Large Player;

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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robin Pope & Reinhard Selten & Sebastian Kube & Jürgen von Hagen, 2006. "Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them," Labsi Experimental Economics Laboratory University of Siena 010, University of Siena. [Downloadable!]
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