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Information Diffusion in International Markets

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  • Alejandro Izquierdo

    ()

  • Jacques Morriset
  • Marcelo Olarreaga

Abstract

Specific information on trade and financial markets across international borders is costly to acquire. Sellers and buyers rely instead on information obtained from partner behavior in other countries. Three channels are identified through which information is disseminated in import and equity markets of 14 OECD countries. The first consists of information spillovers from commercial to financial markets and vice-versa. We find 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. The second and third channels emphasize seller and buyer reputation in third markets. They are equally important in explaining bilateral import flows, but buyer reputation appears to be more relevant 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 Inter-American Development Bank, Research Department in its series Research Department Publications with number 4335.

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Date of creation: Jul 2003
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Handle: RePEc:idb:wpaper:4335

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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. Pipat Luengnaruemitchai & Barry J. Eichengreen, 2006. "Bond Markets As Conduits for Capital Flows," IMF Working Papers 06/238, International Monetary Fund.
  3. Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  4. 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.
  5. 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.

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