nep-ifn New Economics Papers
on International Finance
Issue of 2005‒01‒09
one paper chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Role of Information Disparity in the Mexican Peso Crisis 1994/95: Empirical Evidence By Christina E. Bannier; Jochen Michaelis

  1. By: Christina E. Bannier (Author-Workplace-Name: Department of Finance, Goethe University Frankfurt); Jochen Michaelis (Author-Workplace-Name: Department of Economics, University of Kassel)
    Abstract: In the Mexican Peso crisis 1994/95, the lack of readily available information, particularly regarding monetary aggregates, has often been commented on. This paper scrutinizes the events and analyzes empirically whether information disparities with respect to economic fundamentals attributed to triggering the crisis. Using historical forecast data collected by Consensus Economics, it is shown that uncertainties as measured by the forecast variation played a signi.cant role in explaining the pressure on the .xed Peso rate. This e.ect is additional to the one that actual and expected fundamentals had on the exchange rate pressure. Furthermore, the impact of information disparity is found to be contingent on the prevailing market sentiment. For the Mexican case it even seems that the central bank’s strategy of not publicly disclosing information was detrimental especially because the market was generally optimistic with regard to the monetary development.
    Keywords: Currency Crisis, Speculative Attack, Private and Public Information, Transparency
    JEL: F31 D84 D82
    Date: 2003–02

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