Discussion Paper Series 2006-E-4

Experimental Analysis on the Role of a Large Speculator in Currency Crises

Yasuhiro Arikawa, Kumi Suzuki-Loffelholz, Kenshi Taketa

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.

Copyright © 2006 Bank of Japan All Rights Reserved.

Home Japanese Home