%0 Report
%9 Working Paper
%A Plantin, Guillaume
%A Shin, Huyn
%B TSE Working Paper
%C Toulouse
%D 2014
%F publications:16543
%I Université Toulouse 1 Capitole
%T Destabilizing carry trades
%U https://publications.ut-capitole.fr/id/eprint/16543/
%V 14-512
%X We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supply- ing excessive capital to a target economy. The interest-rate differential between their funding currency and the target currency is their coor- dination device. We solve for a unique equilibrium that exhibits the classic pattern of the carry-trade recipient currency appreciating for extended periods, punctuated by sharp falls.