Accounting for crisis
By: Venky Nagar, Gwen Yu
Contributors: Yu, Gwen; Harvard Business School
Series: Working paper / Harvard Business School -- 11-103; Working paper (Harvard Business School) -- 11-103.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 56
Description: We provide one of the first tests of recent macro global-game crisis models that show that the precision of public signals can coordinate crises (e.g. Angeletos and Werning 2006; Morris and Shin 2002, 2003). In these models, self-fulfilling crises (independent of fundamentals) can occur only when publicly disclosed fundamental signals have high precision; fundamentals are thus the sole driver of crises in low-precision settings. We affirm this proposition on 39 currency crises by exploiting a key publicly disclosed fundamental driving financial markets, namely accounting data. We find that fundamental accounting signals are stronger in-sample predictors of crises in low-precision countries.
Notes: "April 2011" -- Publisher's website.

"November 2010" -- added t.p.

Includes bibliographical references.