Rationalised panics : The consequences of strategic uncertainty during financial crises

This dissertation is about currency and related financial crises such as the contagious Southeast Asian crisis of 1997 or Argentina's collapse and default in 2001. It argues that key to understanding these crises is the doubt that they inflict on market participants about the intentions and actions of others. This "strategic" uncertainty, which comes on top of uncertainty about economic fundamentals, greatly disturbs the behaviour of economic agents and explains many salient features of these crises. Using global games, this dissertation models the consequences of strategic uncertainty during crises. It shows that these are pivotal for understanding important issues, such as the efficacy of defence policies by policy makers against speculative attacks, the influence of the maturity structure of a country's debt portfolio on the likelihood of a crisis, and the timing of a crisis.