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Information Diffusion in International Markets

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Author Info
Alejandro Izquierdo ()
Jacques Morriset
Marcelo Olarreaga

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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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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers 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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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.:
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  2. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
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  3. Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1.
  5. Nicita, Alessandro & Olarreaga, Marcelo, 2000. "Exports and information spillovers," Policy Research Working Paper Series 2474, The World Bank. [Downloadable!]
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  6. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August. [Downloadable!] (restricted)
  7. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Martin, Philippe & Rey, Hélène, 1999. "Financial Super-Markets: Size Matters for Asset Trade," CEPR Discussion Papers 2232, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June. [Downloadable!] (restricted)
  10. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December. [Downloadable!] (restricted)
  12. Enrique G. Mendoza & Katherine A. Smith, 2002. "Margin Calls, Trading Costs, and Asset Prices in Emerging Markets: The Finanical Mechanics of the 'Sudden Stop' Phenomenon," NBER Working Papers 9286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Calvo, Guillermo A. & Mendoza, Enrique G., 2000. "Rational contagion and the globalization of securities markets," Journal of International Economics, Elsevier, vol. 51(1), pages 79-113, June. [Downloadable!] (restricted)
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  14. Bhargava, A & Franzini, L & Narendranathan, W, 1982. "Serial Correlation and the Fixed Effects Model," Review of Economic Studies, Blackwell Publishing, vol. 49(4), pages 533-49, October. [Downloadable!] (restricted)
  15. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
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  17. Francesco Caramazza & Luca Antonio Ricci & Ranil Salgado, 2000. "Trade and Financial Contagion in Currency Crises," IMF Working Papers 00/55, International Monetary Fund.
  18. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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Cited by:
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  1. Barry Eichengreen & Pipat Luengnaruemitchai, 2006. "Bond Markets as Conduits for Capital Flows: How Does Asia Compare?," NBER Working Papers 12408, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. 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. [Downloadable!]
  3. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make Trade not War?," CEPR Discussion Papers 5218, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro. [Downloadable!]
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