The Globalization of Information and Capital Mobility
AbstractThis paper provides a framework for analyzing the effects of symmetric and asymmetric changes in information about risk on equilibrium real interest rate spreads across countries. Following the literature on parameter uncertainty, improvements in information are modeled as reductions in estimated variances. The equilibrium interest differential is determined in a two country setting. The effects of changes in information on the differential are shown in cases where (a) all investors have the same information, (b) home investors have superior information about home assets, and (c) all investors experience an improvement in information about one asset. An improvement in information on European assets in "Europe 1992" will raise the interest differential on U.S. assets relative to European as investors shift toward European assets.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3496.
Date of creation: Feb 1992
Date of revision:
Publication status: published as Accounting and Financial Globalization, edited by Joshua Ronen and Joshua Livnat, pp. 33-62. Westport, CT: Quorum Books, 1991.
Note: ITI IFM
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