Culture and Currency Crisis

Abstract

This master thesis analysis the influence culture, in particular uncertainty avoidance, has on the dissemination and evaluation of private and public information, in the currency crisis model of Metz (2002). Therefore, this thesis works out the importance of culture in the discipline of economics and the influence it has on institutions and currency crises. The way uncertainty avoidance influences the transmitters of information, such as the central bank, government, media and selective experts on the one hand and on the other, private agents as receivers of information, is illustrated. These insights are implemented into the Metz (2002) model, affecting the precision of private and public information. With the help of Metz´s (2002) comparative statistics the increase or decrease of the probability of a currency crisis can be estimated for uncertaintyavoiding and -accepting countries. These probabilities and further cultural insights are then used to derive a market sentiment for uncertainty-avoiding and -accepting countries, which is an indicator for the economic situation of a country.