Corsetti, Dasgupta, Morris, and Shin (2004, RES) demonstrate that the presence of the large speculator can cause the remaining traders to be more aggressive in speculative attacks in the foreign exchange market. We conduct an experimental analysis designed to test theoretical findings of Corsetti, Dasgupta, Morris, and Shin (2004, RES); in fact the results support their theoretical predictions. Moreover, the results also suggest an asymmetric effect in regulating and deregulating the size of the large speculator.
Keywords: Currency Crises; Global Game; Experimental Economics
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.