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

Yuko Hashimoto and Konstantin Wacker

No 2012/242, IMF Working Papers from International Monetary Fund

Abstract: 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.

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 (search for similar items in EconPapers)
Pages: 44
Date: 2012-10-05
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Citations: View citations in EconPapers (14)

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Working Paper: The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS (2012)
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