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The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS

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  • Yuko Hashimoto

    (International Monetary Fund)

  • Konstantin M. Wacker

    (Georg-August-University Göttingen)

Abstract

In this paper, we 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 our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we fi nd statistically signi cant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows and use a non-parametric test for spatial correlation in the residuals of capital flows.

Suggested Citation

  • Yuko Hashimoto & Konstantin M. Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 124, Courant Research Centre PEG.
  • Handle: RePEc:got:gotcrc:124
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    Citations

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    Cited by:

    1. Luis Brandão Brandao Marques & R. G Gelos & Natalia Melgar, 2013. "Country Transparency and the Global Transmission of Financial Shocks," IMF Working Papers 13/156, International Monetary Fund.
    2. Yuko Hashimoto & Konstantin M. Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 124, Courant Research Centre PEG.
    3. Robert M Heath, 2013. "Why are the G-20 Data Gaps Initiative and the SDDS Plus Relevant for Financial Stability Analysis?," IMF Working Papers 13/6, International Monetary Fund.
    4. repec:wsi:jicepx:v:04:y:2013:i:03:n:s179399331350018x is not listed on IDEAS
    5. Wacker, Konstantin M., 2013. "On the measurement of foreign direct investment and its relationship to activities of multinational corporations," Working Paper Series 1614, European Central Bank.
    6. Krishna Chaitanya Vadlamannati & Arusha Cooray, 2015. "Do transparency initiatives work? Assessing the impact of the Special Data Dissemination Standard (SDDS) on data transparency," CAMA Working Papers 2015-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

    determinants of capital flows; information; panel data; risk; SDDS; IMF; 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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