Currency crises and uncertainty about fundamentals

This paper extends some theoretical results of Morris and Shin (1998) concerning the role of uncertainty about fundamentals in currency crises and tests their empirical relevance using a novel approach based on the distribution of survey expectations. Econometric evidence from the Asian crisis confirms the prediction that the dispersion of expectations affects the probability of a speculative attack and that the sign of this effect depends on whether expected fundamentals are "good" or "bad". Extensive robustness checks support the findings.