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Informational Economic Transmission between Countries

Author

Listed:
  • Alejandro Bernales

    (University of Chile)

  • Hriday Karnani

    (Columbia University)

  • Paula Margaretic

    (University of Chile)

Abstract

Informational economic transmission is crucial even after accounting for countries' fundamental real and financial connections. Informational connections emerge from anomalous interdependence in agents' beliefs about countries' economic activity. We propose measuring this interdependence through the correlation (between countries) of analysts' one-year forecast errors about countries' economic performance. Our measure is based on a learning model in which informational transmission occurs when agents incorrectly assess the quality of new information regarding common factors that affect multiple countries simultaneously, due to learning frictions. Informational interdependence remains substantial under various validity analyses and robustness checks, and after addressing endogeneity concerns in several dimensions. Additionally, we demonstrate considerable higher-order spillovers of economic shocks. (Copyright: Elsevier)

Suggested Citation

  • Alejandro Bernales & Hriday Karnani & Paula Margaretic, 2025. "Informational Economic Transmission between Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 58, October.
    • Handle: RePEc:red:issued:24-151
    DOI: 10.1016/j.red.2025.101302
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • F30 - International Economics - - International Finance - - - General
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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