Resource title

On the impact of fundamentals, liquidity, and coordination on market stability

Resource image

image for OpenScout resource :: On the impact of fundamentals, liquidity, and coordination on market stability

Resource description

We develop a coordination game to model interactions between fundamentals and liquidity during unstable periods in financial markets. We then propose a flexible econometric framework for estimation of the model and analysis of its quantitative implications. The specific empirical application is carry trades in the yen-dollar market, including the turmoil of 1998. We find a generally very deep market, with low information disparities among agents. We observe occasional episodes of market fragility or turmoil withup by the escalator, down by the elevatorpatterns in prices. The key role of strategic behavior in the econometric model is also confirmed.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

Resource resource URL

http://eprints.lse.ac.uk/38923/

Resource license