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Country transparency and the global transmission of financial shocks

Luis Brandao-Marques, R. Gaston Gelos and Natalia Melgar
Authors registered in the RePEc Author Service: Luis Brandao Marques

Journal of Banking & Finance, 2018, vol. 96, issue C, 56-72

Abstract: This paper considers the role of country-level opacity (the unavailability of information) in amplifying shocks emanating from financial centers. We provide a simple model where, in the presence of ambiguity about fundamentals (uncertainty about the probability distribution of returns), prices in periphery markets react more strongly to signals from the financial center, the more opaque the periphery market is. The second contribution is empirical evidence for more than 60 bond and equity markets in line with this prediction. Increasing the availability of information about public policies, improving accounting standards, and enhancing disclosure by governments and firms can reduce the response of peripheral asset markets to shocks from global financial centers.

Keywords: Transparency; Transmission of global financial shocks (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Country Transparency and the Global Transmission of Financial Shocks (2013) Downloads
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DOI: 10.1016/j.jbankfin.2018.07.015

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