%S TSE Working Paper
%A Guillaume Plantin
%A Huyn Shin
%T Destabilizing carry trades
%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.
%B TSE Working Paper
%V 14-512
%D 2014
%C Toulouse
%I TSE Working Paper
%L publications16543