Experimental analysis on the role of a large speculator in currency crises

Kenshi Taketa, Kumi Suzuki-Löffelholz, Yasuhiro Arikawa

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Corsetti et al. (2004) demonstrate that the presence of a large speculator in the foreign exchange market makes the remaining traders more aggressive in their speculative attacks. We conduct an experiment designed to test their theoretical predictions and also use the experiment to analyze an additional aspect that has not been previously covered in the literature: namely, whether the entry of a large speculator and the exit of the same speculator have the same effect in magnitude on the probability of a successful speculative attack. We obtain two main findings. First, the results support the main conclusion of Corsetti et al. (2004) that the presence of a large speculator makes other small speculators more aggressive. Second, the results suggest that the effect of the entry of a large speculator on the probability of successful speculative attacks is larger than that of the exit of the same speculator.

Original languageEnglish
Pages (from-to)602-617
Number of pages16
JournalJournal of Economic Behavior and Organization
Volume72
Issue number1
DOIs
Publication statusPublished - 2009 Oct

Fingerprint

Speculators
Currency crises
Experimental analysis
Speculative attacks
Exit
Experiment
Foreign exchange market
Prediction
Traders

Keywords

  • Currency crises
  • Experimental economics
  • Global game

ASJC Scopus subject areas

  • Organizational Behavior and Human Resource Management
  • Economics and Econometrics

Cite this

Experimental analysis on the role of a large speculator in currency crises. / Taketa, Kenshi; Suzuki-Löffelholz, Kumi; Arikawa, Yasuhiro.

In: Journal of Economic Behavior and Organization, Vol. 72, No. 1, 10.2009, p. 602-617.

Research output: Contribution to journalArticle

@article{8a0c03f8faa7412fab8b69b4df1a8f1e,
title = "Experimental analysis on the role of a large speculator in currency crises",
abstract = "Corsetti et al. (2004) demonstrate that the presence of a large speculator in the foreign exchange market makes the remaining traders more aggressive in their speculative attacks. We conduct an experiment designed to test their theoretical predictions and also use the experiment to analyze an additional aspect that has not been previously covered in the literature: namely, whether the entry of a large speculator and the exit of the same speculator have the same effect in magnitude on the probability of a successful speculative attack. We obtain two main findings. First, the results support the main conclusion of Corsetti et al. (2004) that the presence of a large speculator makes other small speculators more aggressive. Second, the results suggest that the effect of the entry of a large speculator on the probability of successful speculative attacks is larger than that of the exit of the same speculator.",
keywords = "Currency crises, Experimental economics, Global game",
author = "Kenshi Taketa and Kumi Suzuki-L{\"o}ffelholz and Yasuhiro Arikawa",
year = "2009",
month = "10",
doi = "10.1016/j.jebo.2009.07.005",
language = "English",
volume = "72",
pages = "602--617",
journal = "Journal of Economic Behavior and Organization",
issn = "0167-2681",
publisher = "Elsevier",
number = "1",

}

TY - JOUR

T1 - Experimental analysis on the role of a large speculator in currency crises

AU - Taketa, Kenshi

AU - Suzuki-Löffelholz, Kumi

AU - Arikawa, Yasuhiro

PY - 2009/10

Y1 - 2009/10

N2 - Corsetti et al. (2004) demonstrate that the presence of a large speculator in the foreign exchange market makes the remaining traders more aggressive in their speculative attacks. We conduct an experiment designed to test their theoretical predictions and also use the experiment to analyze an additional aspect that has not been previously covered in the literature: namely, whether the entry of a large speculator and the exit of the same speculator have the same effect in magnitude on the probability of a successful speculative attack. We obtain two main findings. First, the results support the main conclusion of Corsetti et al. (2004) that the presence of a large speculator makes other small speculators more aggressive. Second, the results suggest that the effect of the entry of a large speculator on the probability of successful speculative attacks is larger than that of the exit of the same speculator.

AB - Corsetti et al. (2004) demonstrate that the presence of a large speculator in the foreign exchange market makes the remaining traders more aggressive in their speculative attacks. We conduct an experiment designed to test their theoretical predictions and also use the experiment to analyze an additional aspect that has not been previously covered in the literature: namely, whether the entry of a large speculator and the exit of the same speculator have the same effect in magnitude on the probability of a successful speculative attack. We obtain two main findings. First, the results support the main conclusion of Corsetti et al. (2004) that the presence of a large speculator makes other small speculators more aggressive. Second, the results suggest that the effect of the entry of a large speculator on the probability of successful speculative attacks is larger than that of the exit of the same speculator.

KW - Currency crises

KW - Experimental economics

KW - Global game

UR - http://www.scopus.com/inward/record.url?scp=70349439000&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=70349439000&partnerID=8YFLogxK

U2 - 10.1016/j.jebo.2009.07.005

DO - 10.1016/j.jebo.2009.07.005

M3 - Article

AN - SCOPUS:70349439000

VL - 72

SP - 602

EP - 617

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

SN - 0167-2681

IS - 1

ER -