International Capital Crunches: The Time-Varying Role of Informational Asymmetries

Ashoka Mody and Mark Taylor

No 2002/043, IMF Working Papers from International Monetary Fund

Abstract: We examine the determinants of capital flows to four developing countries during the 1990s using an explicitly disequilibrium econometric framework in which the supply and demand for capital are not necessarily equal and the actual amount of the flow is determined by the ‘short side’ of the market. We are thus able to detect instances of ‘international capital crunch’—where capital flows are curtailed because of supply-side rationing—and to relate these instances to movements in the underlying fundamentals. The analysis highlights the role of asymmetric information—as distinct from the traditional concern with default risk—in conditioning capital flows.

Keywords: WP; capital flow; capital; supply and demand; capital crunch; Capital flows; disequilibrium; rationing; asymmetric information; demand and supply; short-term debt; supply and demand function; supply and demand demand curve; Emerging and frontier financial markets; Credit; Stock markets; Imports; East Asia; Global (search for similar items in EconPapers)
Pages: 26
Date: 2002-02-01
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Citations: View citations in EconPapers (27)

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Related works:
Journal Article: International capital crunches: the time-varying role of informational asymmetries (2013)
Working Paper: International Capital Crunches: The Time-Varying Role Of Informational Asymmetries (2004)
Working Paper: International Capital Crunches: The Time-Varying Role of Informational Asymmetries (2003)
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