The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS
AbstractIn this paper, we investigate whether better information about the macroeconomic environment of an economy has a positive impact on its capital inflows, namely portfolio and foreign direct investment (FDI). The purpose of our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we fi nd statistically signi cant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows and use a non-parametric test for spatial correlation in the residuals of capital flows.
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Bibliographic InfoPaper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 124.
Date of creation: 12 Sep 2012
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determinants of capital flows; information; panel data; risk; SDDS; IMF; FDI; portfolio investment; spatial econometrics;
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-CBA-2012-09-30 (Central Banking)
- NEP-IFN-2012-09-30 (International Finance)
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- Wacker, Konstantin M., 2013. "On the measurement of foreign direct investment and its relationship to activities of multinational corporations," Working Paper Series, European Central Bank 1614, European Central Bank.
- Yuko Hashimoto & Konstantin Wacker, 2012. "The Role of Risk and Information for International Capital Flows," IMF Working Papers, International Monetary Fund 12/242, International Monetary Fund.
- LuÃs BrandÃ£o Marques & Gaston Gelos & Natalia Melgar, 2013. "Country Transparency and the Global Transmission of Financial Shocks," IMF Working Papers, International Monetary Fund 13/156, International Monetary Fund.
- Robert M. Heath, 2013. "Why are the G-20 Data Gaps Initiative and the SDDS Plus Relevant for Financial Stability Analysis?," IMF Working Papers, International Monetary Fund 13/6, International Monetary Fund.
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