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

  • Yuko Hashimoto

    (International Monetary Fund)

  • Konstantin M. Wacker

    (Georg-August-University Göttingen)

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.

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Paper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 124.

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Date of creation: 12 Sep 2012
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Handle: RePEc:got:gotcrc:124
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