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Information Diffusion in International Markets

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  • Alejandro Izquierdo

    ()

  • Jacques Morriset
  • Marcelo Olarreaga

Abstract

Specific information on trade and financial markets across international borders is costly to acquire. Sellers and buyers rely instead on information obtained from partner behavior in other countries. Three channels are identified through which information is disseminated in import and equity markets of 14 OECD countries. The first consists of information spillovers from commercial to financial markets and vice-versa. We find strong evidence in support of the first direction and some for the reverse, suggesting that traders use common information, frequently from the same sources, such as financial intermediaries. The second and third channels emphasize seller and buyer reputation in third markets. They are equally important in explaining bilateral import flows, but buyer reputation appears to be more relevant for equity flows. All three channels may help better explain contagion effects across markets and countries.

Suggested Citation

  • Alejandro Izquierdo & Jacques Morriset & Marcelo Olarreaga, 2003. "Information Diffusion in International Markets," Research Department Publications 4335, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4335
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    Cited by:

    1. Barry Eichengreen & Pipat Luengnaruemitchai, 2008. "Bond Markets as Conduits for Capital Flows: How Does Asia Compare?," NBER Chapters,in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 267-313 National Bureau of Economic Research, Inc.
    2. Jamel Boukhatem, 2009. "Essai sur les déterminants empiriques de développement des marchés obligataires," EconomiX Working Papers 2009-32, University of Paris Nanterre, EconomiX.
    3. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, pages 865-900.
    4. Luis Araujo & Emanuel Ornelas, 2005. "Trust-Based Trade," IBMEC RJ Economics Discussion Papers 2005-08, Economics Research Group, IBMEC Business School - Rio de Janeiro.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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