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The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS
Author:
Ms. Yuko Hashimoto
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and
Mr. Konstantin Wacker
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 242
Language:
English
Publication Date:
05 Oct 2012
DOI:
https://doi.org/10.5089/9781475568660.001
ISBN:
9781475568660
ISSN:
1018-5941
Pages:
44
Keywords:
WP; FDI inflow; interest rate; emerging market; FDI flow; determinants of capital flows; information; panel data; risk; SDDS; IMF; FDI; portfolio investment; spatial econometrics; FDI-agglomeration literature; FDI literature; SDDS subscription; portfolio flow; Foreign direct investment; Special Data Dissemination Standard (SDDS); Capital flows; Exchange rates; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund