IMF Working Papers

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

By Ashoka Mody, Mark P. Taylor

February 1, 2002

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Ashoka Mody, and Mark P. Taylor International Capital Crunches: The Time-Varying Role of Informational Asymmetries, (USA: International Monetary Fund, 2002) accessed November 21, 2024
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.

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

Keywords: Asymmetric information, Capital, Capital crunch, Capital flow, Capital flows, Credit, Demand and supply, Disequilibrium, East Asia, Emerging and frontier financial markets, Global, Imports, Rationing, Short-term debt, Stock markets, Supply and demand, Supply and demand demand curve, Supply and demand function, WP

Publication Details

  • Pages:

    26

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2002/043

  • Stock No:

    WPIEA0432002

  • ISBN:

    9781451846331

  • ISSN:

    1018-5941

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