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Information Diffusion in International Markets

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  • Izquierdo, Alejandro
  • Morisset, Jacques
  • Olarreaga, Marcelo

Abstract

Information is costly to acquire in trade and financial markets, especially across international borders. Sellers and buyers rely on information and experiences of other firms, including from business partners located in other countries. This Paper identifies three channels through which information is disseminated in the import and equity markets of 14 OECD countries. The first channel consists of information spillovers from the commercial to the financial markets and vice-versa. We found strong evidence in support of the first direction and some for the reverse, suggesting that traders use common information, frequently from the same sources such as financial intermediaries or banks. The second and third channels emphasize seller and buyer reputation in third markets. While these two channels are equally important in explaining bilateral import flows, buyer reputation appears to be of greater importance for equity flows. All three channels may help better explain contagion effects across markets and countries.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3872.

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Date of creation: Apr 2003
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Handle: RePEc:cpr:ceprdp:3872

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Keywords: equity flows; information spillovers; trade;

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References

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Citations

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Cited by:
  1. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make Trade not War?," CEPR Discussion Papers 5218, C.E.P.R. Discussion Papers.
  2. Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  3. Jamel Boukhatem, 2009. "Essai sur les déterminants empiriques de développement des marchés obligataires," EconomiX Working Papers 2009-32, University of Paris West - Nanterre la Défense, EconomiX.
  4. Pipat Luengnaruemitchai & Barry J. Eichengreen, 2006. "Bond Markets As Conduits for Capital Flows," IMF Working Papers 06/238, International Monetary Fund.
  5. Barry Eichengreen & Pipat Luengnaruemitchai, 2008. "Bond Markets as Conduits for Capital Flows: How Does Asia Compare?," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 267-313 National Bureau of Economic Research, Inc.

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