Project without external funding

The Role of Information Disparity in the Mexican Peso Crisis 1994/95: Empirical Evidence

Project Details
Project duration: 01/200001/2003

In the Mexican Peso crisis 1994/95, the lack of readily available information, in particular with regard to monetary aggregates, has often been commented on. The paper analyses whether information disparities with respect to economic fundamentals attributed to the onset of the crisis. Using historical forecast data collected by Consensus Economics as a proxy for information, it is shown that uncertainties about economic fundamentals played a significant role in explaining the pressure on the fixed Peso rate. This effect is additional to the one that actual and expected fundamentals have. However, the impact of forecast variation on the crisis event is found to be contingent on the prevailing market sentiment. For the Mexican case it seems that the central bank’s strategy of not publicly disclosing information was detrimental especially because the market was generally optimistic with regard to the monetary development.

Last updated on 2017-11-07 at 13:45