Country Transparency and the Global Transmission of Financial Shocks

Author/Editor:

Luis Brandão Brandao Marques ; Natalia Melgar ; R. G Gelos

Publication Date:

July 3, 2013

Electronic Access:

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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:

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.

Series:

Working Paper No. 13/156

Subject:

English

Publication Date:

July 3, 2013

ISBN/ISSN:

9781484397237/1018-5941

Stock No:

WPIEA2013156

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

38

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