Sovereign Liquidity Crises: Analytics and Implications for Public Policy

Chui, Michael; Gai, Prasanna; Haldane, Andrew

doi:10.2139/ssrn.241948

Cited by 23 publications

(21 citation statements)

References 18 publications

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“…Morris and Shin (2001) are concerned with welfare effects of public information in models with strategic complementarities. Similarly, Chui et al (2000) analyze the implications of sovereign liquidity crises for public policy. Another interesting aspect involves departure from simultaneous move games, in which speculators have to decide on their strategies at the same point in time, and consideration of sequential move games.…”

Section: Resultsmentioning

confidence: 99%

Private and Public Information in Self-fulfilling Currency Crises

Metz

2002

J. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all equilibria but one are eliminated so that we are able to derive comparative statics and subsequent policy devices. We can show that if the a priori expected fundamental state of the economy is good, there is an incentive for the government to disseminate very precise information. However, a high precision of public information increases the danger of an attack if ex-ante expected fundamentals are bad. Moreover, we find that the influence of private information's precision is exactly the reverse. Terms of use: Documents in $EVWUDFWThis paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all equilibria but one are eliminated so that we are able to derive comparative statics and subsequent policy devices. We can show that if the a priori expected fundamental state of the economy is good, there is an incentive for the government to disseminate very precise information. However, a high precision of public information increases the danger of an attack if ex-ante expected fundamentals are bad. Moreover, we find that the influence of private information's precision is exactly the reverse. JEL: F31, D82

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Section: Resultsmentioning

confidence: 99%

Private and Public Information in Self-fulfilling Currency Crises

Metz

2002

J. Econ.

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“…This formula differs substantially from the welfare cost formula (19) reported in Chui et al (2002). Applying Eq.…”

Section: Welfare Computations and Policy Implicationsmentioning

confidence: 66%

“…In order to compute the belief-based welfare cost of coordination failure in the debtor country, Chui et al (2002) compute the disruption cost from fleeing creditors in situations where the country defaults although the state of fundamentals is not too ''weak'':…”

Section: Welfare Computations and Policy Implicationsmentioning

confidence: 99%

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A note on Chui, Gai and Haldane’s “Sovereign liquidity crisis: Analytics and implications for public policy”

Dreisbach

Kindermann

2008

Journal of Banking & Finance

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“…The policy implications, for sovereign liquidity crises, of this approach are examined in Chui, Gai and Haldane (2000).…”

Section: Discussionmentioning

confidence: 99%

Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises

Gai

Hayes

Shin

2004

Journal of International Economics

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Recent debate on the reform of the international financial architecture has highlighted the potentially important role of the official sector in crisis management. We examine how such public intervention in sovereign debt crises affects efficiency, ex ante and ex post. Our results shed light on the scale of capital inflows in such a regime, and we establish conditions under which this leads to an improvement in debtor country welfare. The efficacy of measures such as officially sanctioned stays on creditor litigation depend critically on the quality of public sector surveillance and the size of the costs of sovereign debt crises. * Andrew Haldane, Adrian Penalver, Paul Tucker and an anonymous referee for helpful comments and encouragement. We thank seminar participants at the International Finance Summer Camp in Santiago, the London School of Economics, the University of Newcastle upon Tyne, the Bank of England and the Bank of Japan for comments on an earlier version of the paper. The usual caveat applies. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Bank of England. †

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Sovereign Liquidity Crises: Analytics and Implications for Public Policy

Cited by 23 publications

References 18 publications

Private and Public Information in Self-fulfilling Currency Crises

Private and Public Information in Self-fulfilling Currency Crises

A note on Chui, Gai and Haldane’s “Sovereign liquidity crisis: Analytics and implications for public policy”

Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises

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