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The role of information for international capital flows: new evidence from the SDDS

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  • Yuko Hashimoto

    () (International Monetary Fund)

  • K. M. Wacker

    () (University of Mainz)

Abstract

Abstract In this paper, the authors 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 the study is to explicitly quantify information asymmetries by compliance with the IMF’s Special Data Dissemination Standard (SDDS). The authors find that compliance with the SDDS increased FDI inflows by an economically relevant magnitude of 56 % while there are no such aggregate effects for portfolio flows. The empirical strategy demonstrates that the effect runs from SDDS to FDI and not vice versa, introduces a test for endogeneity bias due to omitted variables, and tests for spatial correlation in the residuals.

Suggested Citation

  • Yuko Hashimoto & K. M. Wacker, 2016. "The role of information for international capital flows: new evidence from the SDDS," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(3), pages 529-557, August.
  • Handle: RePEc:spr:weltar:v:152:y:2016:i:3:d:10.1007_s10290-016-0250-4
    DOI: 10.1007/s10290-016-0250-4
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    Cited by:

    1. Katharina van Treeck & K.M. Wacker, 2017. "Financial Globalization and the Labor Share in Developing Countries: The Type of Capital Matters," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 219, Courant Research Centre PEG.

    More about this item

    Keywords

    Determinants of capital flows; Information; Panel data; SDDS; FDI; Portfolio investment; Spatial econometrics;

    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

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