IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Country Transparency and the Global Transmission of Financial Shocks

  • Luís Brandão Marques
  • Gaston Gelos
  • Natalia Melgar

This paper considers the role of country-level opacity (the lack of availability of information) in amplifying shocks emanating from financial centers. We provide a simple model where, in the presence of ambiguity (uncertainty about the probability distribution of returns), prices in emerging markets react more strongly to signals from the developed market, the more opaque the emerging market is. The second contribution is empirical evidence for bond and equity markets in line with this prediction. Increasing the availability of information about public policies, improving accounting standards, and enhancing legal frameworks can help reduce the unpleasant side effects of financial globalization.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/156.

in new window

Length: 38
Date of creation: 03 Jul 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/156
Contact details of provider: Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page:

More information through EDIRC

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March.
  2. Fernando Broner & Tatiana Didier & Aitor Erce & Sergio L. Schmukler, 2010. "Gross capital flows: Dynamics and crises," Economics Working Papers 1227, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2012.
  3. Didier, Tatiana & Love, Inessa & Peria, Maria Soledad Martinez, 2010. "What explains stock markets'vulnerability to the 2007-2008 crisis ?," Policy Research Working Paper Series 5224, The World Bank.
  4. Fernando A. Broner & R. Gaston Gelos & Carmen Reinhart, 2004. "When in Peril, Retrench: Testing the Portfolio Channel of Contagion," NBER Working Papers 10941, National Bureau of Economic Research, Inc.
  5. Bekaert, Geert & Ehrmann, Michael & Fratzscher, Marcel & Mehl, Arnaud, 2011. "Global crises and equity market contagion," Working Paper Series 1381, European Central Bank.
  6. Drees, Burkhard & Eckwert, Bernhard & Várdy, Felix, 2013. "Cheap money and risk taking: Opacity versus fundamental risk," European Economic Review, Elsevier, vol. 62(C), pages 114-129.
  7. Johnson, Simon & Boone, Peter & Breach, Alasdair & Friedman, Eric, 2000. "Corporate governance in the Asian financial crisis," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 141-186.
  8. Harrison Hong & David Sraer, 2012. "Speculative Betas," NBER Working Papers 18548, National Bureau of Economic Research, Inc.
  9. Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2008. "Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration," Research Department Publications 4581, Inter-American Development Bank, Research Department.
  10. Comelli, Fabio, 2012. "Emerging market sovereign bond spreads: Estimation and back-testing," Emerging Markets Review, Elsevier, vol. 13(4), pages 598-625.
  11. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
  12. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
  13. Marcel Fratzscher, 2011. "Capital Flows, Push versus Pull Factors and the Global Financial Crisis," NBER Chapters, in: Global Financial Crisis National Bureau of Economic Research, Inc.
  14. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
  15. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  16. Gollier, Christian, 2009. "Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion," TSE Working Papers 09-068, Toulouse School of Economics (TSE).
  17. Fabio Comelli, 2012. "Emerging Market Sovereign Bond Spreads: Estimation and Back-testing," IMF Working Papers 12/212, International Monetary Fund.
  18. David Easley & Maureen O'Hara, 2009. "Ambiguity and Nonparticipation: The Role of Regulation," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1817-1843, May.
  19. Dumas, Bernard & Solnik, Bruno, 1995. " The World Price of Foreign Exchange Risk," Journal of Finance, American Finance Association, vol. 50(2), pages 445-79, June.
  20. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why Do Countries Matter So Much for Corporate Governance?," Working Paper Series 2004-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  21. Yuko Hashimoto & Konstantin Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," IMF Working Papers 12/242, International Monetary Fund.
  22. de Jong, Frank & de Roon, Frans, 2001. "Time-Varying Market Integration and Expected Returns in Emerging Markets," CEPR Discussion Papers 3102, C.E.P.R. Discussion Papers.
  23. Errunza, Vihang & Losq, Etienne, 1985. " International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, vol. 40(1), pages 105-24, March.
  24. Lang, Mark & Maffett, Mark, 2011. "Transparency and liquidity uncertainty in crisis periods," Journal of Accounting and Economics, Elsevier, vol. 52(2), pages 101-125.
  25. Laura E. Kodres & Kristian Hartelius & Kenichiro Kashiwase, 2008. "Emerging Market Spread Compression: Is it Real or is it Liquidity?," IMF Working Papers 08/10, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:13/156. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)

or (Hassan Zaidi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.