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The Role of Information Disclosure and Uncertainty in the 1994/95 Mexican Peso Crisis: Empirical Evidence

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  • Christina E. Bannier

Abstract

This paper analyzes the role that the distribution of information played during the Mexican peso crisis 1994/95. In accordance with theoretical models, we find that, first, an improvement in the mean of posterior beliefs about economic fundamentals generally reduced speculative pressures. Secondly, the standard deviation of beliefs as a measure of information disparity did not significantly influence traders’ behavior. Information disparity did have a significant impact, however, when combined with the mean of beliefs. The combined effect, moreover, allows a tentative distinction between private or public information having dominated posterior beliefs. In this respect, thirdly, our analysis points to public information having driven speculative pressures.

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  • Christina E. Bannier, 2006. "The Role of Information Disclosure and Uncertainty in the 1994/95 Mexican Peso Crisis: Empirical Evidence," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 883-909, November.
    • Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:883-909
    DOI: 10.1111/j.1467-9396.2006.00596.x
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    1. Jeffrey A. Frankel and Sergio L. Shmukler., 1996. "Country Fund Discounts, Asymmetric Information and the Mexican Crisis of 1994: Did Local Residents Turn Pessimistic Before International Investors?," Center for International and Development Economics Research (CIDER) Working Papers C96-067, University of California at Berkeley.
    2. Sebastian Edwards & Miguel A. Savastano, 1998. "The Morning After: The Mexican Peso in the Aftermath of the 1994 Currency Crisis," NBER Working Papers 6516, National Bureau of Economic Research, Inc.
    3. Alessandro Prati & Massimo Sbracia, 2002. "Currency crises and uncertainty about fundamentals," Temi di discussione (Economic working papers) 446, Bank of Italy, Economic Research and International Relations Area.
    4. Sebastian Edwards, 1997. "The Mexican Peso Crisis? How Much Did We Know? When Did We Know It?," NBER Working Papers 6334, National Bureau of Economic Research, Inc.
    5. Jeffrey Frankel & Sergio Schmukler, 1996. "Country fund discounts and the mexican crisis of December 1994: Did local residents turn pessimistic before international investors?," Open Economies Review, Springer, vol. 7(1), pages 511-534, March.
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    1. Jean-Pierre Allegret & Camille Cornand, 2006. "The pros and cons of higher transparency: the case of speculative attacks," Recherches économiques de Louvain, De Boeck Université, vol. 72(3), pages 215-246.
    2. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    3. Prati, Alessandro & Sbracia, Massimo, 2010. "Uncertainty and currency crises: Evidence from survey data," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 668-681, September.
    4. Kannan, Prakash & Kohler-Geib, Fritzi, 2009. "The uncertainty channel of contagion," Policy Research Working Paper Series 4995, The World Bank.
    5. George-Marios Angeletos & Chen Lian, 2016. "Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination," NBER Working Papers 22297, National Bureau of Economic Research, Inc.
    6. Leila Ali, 2012. "Flexibility: Stability's Best Friend in Non-transparent Countries?," International Economic Journal, Taylor & Francis Journals, vol. 26(2), pages 247-264, December.
    7. Franklin Allen & Elena Carletti, 2007. "Banks, Markets and Liquidity," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Jeremy Lawson (ed.),The Structure and Resilience of the Financial System, Reserve Bank of Australia.

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