Advanced Search
MyIDEAS: Login

Do investors disproportionately shed assets of distant countries during global financial crises?: The role of increased uncertainty

Contents:

Author Info

  • Rudiger Ahrend
  • Cyrille Schwellnus

Abstract

The global crisis of 2008-09 went hand in hand with sharp fluctuations in capital flows. To some extent, these fluctuations may have been attributable to uncertainty-averse investors indiscriminately selling assets about which they had poor information, including those in geographically distant locations. Using a gravity equation setup, this article shows that the impact of distance increases with investors’ uncertainty aversion. Consistent with a sudden increase in uncertainty, the negative impact of distance on foreign holdings increased during the global financial crisis of 2008-09. Host-country structural policies enhancing the quality of information available to foreign investors, such as strict disclosure requirements and prudential bank regulation, tended to mitigate withdrawals.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dx.doi.org/10.1787/eco_studies-2012-5k4dpmw9hphc
Download Restriction: Full text available to READ online. PDF download available to OECD iLibrary subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by OECD Publishing in its journal OECD Journal: Economic Studies.

Volume (Year): 2012 (2012)
Issue (Month): 1 ()
Pages: 1-20

as in new window
Handle: RePEc:oec:ecokac:5k4dpmw9hphc

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Email:
Web page: http://www.oecd.org
More information through EDIRC

Order Information:
Web: http://www.oecd.org/bookshop?19952856

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Keith Head & John Ries & Thierry Mayer, 2008. "How Remote is the Offshoring Threat ?," Sciences Po publications info:hdl:2441/10143, Sciences Po.
  2. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
  3. Ralph de Haas & Neeltje van Horen, 2011. "Running for the Exit: International Banks and Crisis Transmission," DNB Working Papers 279, Netherlands Central Bank, Research Department.
  4. P Martin & H Rey, 2000. "Financial Super-Markets: Size Matters for Asset Trade," CEP Discussion Papers dp0450, Centre for Economic Performance, LSE.
  5. Yohei Okawa & Eric van Wincoop, 2010. "Gravity in International Finance," Working Papers 072010, Hong Kong Institute for Monetary Research.
  6. Kee-Hong Bae & Rene M. Stulz & Hongping Tan, 2005. "Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts," NBER Working Papers 11697, National Bureau of Economic Research, Inc.
  7. Rocco Huang, 2005. "Tolerance For Uncertainty and the Growth of Informationally Opaque Industries," Macroeconomics 0507020, EconWPA.
  8. J. M. C. Santos Silva & Silvana Tenreyro, 2011. "poisson: Some convergence issues," Stata Journal, StataCorp LP, vol. 11(2), pages 215-225, June.
  9. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, 09.
  10. Matthieu Bussière & Bernd Schnatz, 2009. "Evaluating China’s Integration in World Trade with a Gravity Model Based Benchmark," Open Economies Review, Springer, vol. 20(1), pages 85-111, February.
  11. Harald Uhlig, 2009. "A Model of a Systemic Bank Run," Working Papers 2009-006, Becker Friedman Institute for Research In Economics.
  12. Rocco Huang, 2005. "Distance and Trade: Disentangling unfamiliarity effects and transport cost effects," International Trade 0511010, EconWPA.
  13. Jean Imbs, 2010. "The First Global Recession in Decades," IMF Economic Review, Palgrave Macmillan, vol. 58(2), pages 327-354, December.
  14. Daude, Christian & Fratzscher, Marcel, 2008. "The pecking order of cross-border investment," Journal of International Economics, Elsevier, vol. 74(1), pages 94-119, January.
  15. Ricardo J. Caballero & Arvind Krishnamurthy, 2008. "Collective Risk Management in a Flight to Quality Episode," Journal of Finance, American Finance Association, vol. 63(5), pages 2195-2230, October.
  16. Rudiger Ahrend & Jens Arnold & Fabrice Murtin, 2009. "Prudential Regulation and Competition in Financial Markets," OECD Economics Department Working Papers 735, OECD Publishing.
  17. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2003. "The Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trade of Money Managers," NBER Working Papers 9711, National Bureau of Economic Research, Inc.
  18. Baldwin, Richard, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
  19. Head, Charles Keith & Mayer, Thierry & Ries, John, 2007. "How Remote is the Offshoring Threat?," CEPR Discussion Papers 6542, C.E.P.R. Discussion Papers.
  20. Christopher J. Malloy, 2005. "The Geography of Equity Analysis," Journal of Finance, American Finance Association, vol. 60(2), pages 719-755, 04.
  21. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
  22. Portes, Richard & Rey, Helene & Oh, Yonghyup, 2001. "Information and capital flows: The determinants of transactions in financial assets," European Economic Review, Elsevier, vol. 45(4-6), pages 783-796, May.
  23. Harald Hau, 2001. "Location Matters: An Examination of Trading Profits," Journal of Finance, American Finance Association, vol. 56(5), pages 1959-1983, October.
  24. Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
  25. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Caroline Van Rijckeghem & Beatrice Weder di Mauro, 2013. "Financial Deglobalization: Is The World Getting Smaller?," Working Papers 2013/14, Bogazici University, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oec:ecokac:5k4dpmw9hphc. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.