Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5101290 | Journal of Macroeconomics | 2017 | 34 Pages |
Abstract
This paper adds a speculator and an authority to a benchmark global game model to investigate how the speculator endangers a business or an economy, and what the authority can do about it. It is found that the existence of a speculator increases the financial system's vulnerability by serving as a coordinating device for the investors and thus triggering the crisis. We then compare three different intervention policies imposed by the authority aiming to counteract this effect: deterring the speculator, rewarding holding investors, and eliminating the preemption motives among investors. We argue that the first method may not work because of the multiplicity problem; the second one is useless when a crisis is about to happen; the last tool works given enough effort. We also include a discussion of different intervention polices employed by governments during the 1997 Asian financial crisis to illustrate the theoretical results.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Ming Yi,