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

Author/Editor:

Ashoka Mody ; Mark P. Taylor

Publication Date:

February 1, 2002

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

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.

Series:

Working Paper No. 2002/043

Subject:

Balance of payments Capital flows Capital inflows Credit Emerging and frontier financial markets Financial markets Imports International trade Money Stock markets

English

Publication Date:

February 1, 2002

ISBN/ISSN:

9781451846331/1018-5941

Stock No:

WPIEA0432002

Pages:

26

Please address any questions about this title to publications@imf.org