This paper models currency attacks as carried out by speculators who condition their actions on private signals about the state and on the market-clearing interest rate. Besides affecting speculators' payoffs, this interest rate also provides an endogenous public signal. For a plausible type of...

AbstractThe following sections are included:IntroductionData and MethodologyFrequency-based filter analysisTurning-point analysisCharacterizing Cycles in Individual SeriesFrequency-based filter analysis: Short-term and medium-term cyclesTurning-point analysis: Short-term and medium-term...

Ideally, early warning indicators (EWI) of banking crises should be evaluated on the basis of their performance relative to the macroprudential policy maker’s decision problem. We translate several practical aspects of this problem — such as difficulties in assessing the costs and benefits...

We critically review the state of the art in macro stress testing, assessing its strengths and weaknesses. We argue that, given current technology, macro stress tests are ill-suited as early warning devices, i.e. as tools for identifying vulnerabilities during seemingly tranquil times and for...

Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experimentally investigate the effects of...