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.
Published in 2010 in: Journal of Monetary Economics, v, 57, 6, pp. 668-681
