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

Author/Editor: Yuko Hashimoto | Konstantin Wacker
Authorized for Distribution: October 5, 2012
Electronic Access: Free Full Text (PDF file size is 1,020KB)
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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: 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.
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Series: Working Paper No. 12/242
Subject(s): Capital flows | Capital inflows | Foreign direct investment | International capital markets | Special Data Dissemination Standard | Economic models
    Published:   October 5, 2012        
    ISBN/ISSN:   9781475568660/1018-5941   Format:   Paper
    Stock No:   WPIEA2012242   Pages:   44
    Price:   US$18.00
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