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

October 5, 2012

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Format: Chicago

Yuko Hashimoto, and Konstantin Wacker. The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS, (USA: International Monetary Fund, 2012) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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 find statistically significant 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 anduse a non-parametric test for spatial correlation in the residual of capital flows.

Subject: Balance of payments, Capital flows, Economic and financial statistics, Exchange rates, Foreign direct investment, Foreign exchange, Portfolio investment, Special Data Dissemination Standard (SDDS)

Keywords: Capital flows, Determinants of capital flows, Emerging market, Exchange rates, FDI, FDI flow, FDI inflow, FDI literature, FDI-agglomeration literature, Foreign direct investment, Global, IMF, Information, Interest rate, Panel data, Portfolio flow, Portfolio investment, Risk, SDDS, SDDS subscription, Spatial econometrics, Special Data Dissemination Standard (SDDS), WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/242
Stock No:

WPIEA2012242
ISBN:

9781475568660
ISSN:

1018-5941

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