Accounting for Crises
American Economic Journal: Macroeconomics
vol. 6,
no. 3, July 2014
(pp. 184-213)
Abstract
We provide among the first empirical evidence, consistent with recent macro global game crisis models, that shows that the precision of public signals can coordinate crises. In these models, self-fulfilling crises independent of fundamentals can occur only when publicly disclosed signals of fundamentals have high precision; poor fundamentals are the sole driver of crises only in low precision settings. We exploit a key publicly disclosed signal of fundamentals, namely accounting data, for 68 currency and systemic banking crises in 17 countries. We find that precrisis accounting signals of fundamentals are significantly lower only in low-precision countries.Citation
Nagar, Venky, and Gwen Yu. 2014. "Accounting for Crises." American Economic Journal: Macroeconomics, 6 (3): 184-213. DOI: 10.1257/mac.6.3.184Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- L25 Firm Performance: Size, Diversification, and Scope
- M40 Accounting and Auditing: General
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