The paper by Stephen Morris and Hyun Song Shin explores the dynamics of self-fulfilling currency attacks, a phenomenon where speculative attacks on a currency can occur without any fundamental change in the economy. The authors demonstrate that while such attacks can lead to multiple equilibria when speculators have perfect knowledge of fundamentals, the introduction of noise in their signals about the fundamentals results in a unique equilibrium. This unique equilibrium depends on both the fundamentals and financial variables such as the quantity of hot money and transaction costs. The model allows for a more realistic analysis of policy proposals aimed at curbing currency attacks, as it accounts for the role of information and the strategic interactions between the government and speculators. The paper also discusses the implications of changes in transaction costs and aggregate wealth on the incidence of currency attacks, suggesting that direct capital controls may be most effective when there is a lack of transparency in economic fundamentals. Overall, the study highlights the importance of transparency and communication in monetary policy in preventing currency crises.The paper by Stephen Morris and Hyun Song Shin explores the dynamics of self-fulfilling currency attacks, a phenomenon where speculative attacks on a currency can occur without any fundamental change in the economy. The authors demonstrate that while such attacks can lead to multiple equilibria when speculators have perfect knowledge of fundamentals, the introduction of noise in their signals about the fundamentals results in a unique equilibrium. This unique equilibrium depends on both the fundamentals and financial variables such as the quantity of hot money and transaction costs. The model allows for a more realistic analysis of policy proposals aimed at curbing currency attacks, as it accounts for the role of information and the strategic interactions between the government and speculators. The paper also discusses the implications of changes in transaction costs and aggregate wealth on the incidence of currency attacks, suggesting that direct capital controls may be most effective when there is a lack of transparency in economic fundamentals. Overall, the study highlights the importance of transparency and communication in monetary policy in preventing currency crises.