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- Title
Does Transparency of Central Banks Produce Multiple Equilibria on Currency Markets?
- Authors
Lindner, Axel
- Abstract
A recent strand of literature shows that multiple equilibria in models of markets for pegged currencies vanish if there is slightly diverse information among traders; see Morris and Shin (2001). It is known that this approach works only if the common knowledge in the market is not too precise. This has led to the conclusion that central banks should try to avoid making their information common knowledge. We develop a model in which more transparency of the central bank implies better private information, because each trader utilises public information according to her own private information. Thus, transparency makes multiple equilibria less likely.
- Subjects
ECONOMIC equilibrium; CENTRAL banking industry; CURRENCY crises; CURRENCY question; ECONOMIC models; MARKET equilibrium
- Publication
Scandinavian Journal of Economics, 2006, Vol 108, Issue 1, p1
- ISSN
0347-0520
- Publication type
Article
- DOI
10.1111/j.1467-9442.2006.00436.x