International Capital Crunches: The Time-Varying Role of Informational Asymmetries
IMF Working Papers, February 1, 2002
Source details
- Canonical URL
- International Capital Crunches: The Time-Varying Role of Informational Asymmetries
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Bibliographic details
- Authors: Ashoka Mody, Mark P. Taylor
- Published: February 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846331.001
Summary
- Authors: Ashoka Mody, Mark P. Taylor
- Date: February 1, 2002
- Core finding: The analysis highlights the role of asymmetric information—as distinct from the traditional concern with default risk—in conditioning capital flows.
- Central concept: Detection of “international capital crunch”—instances where capital flows are curtailed because of supply-side rationing—by relating these instances to movements in underlying fundamentals.
Methodology
- Framework: 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.
- Scope: Determinants of capital flows to four developing countries during the 1990s.
Key findings
- The disequilibrium approach permits identification of episodes where supply-side rationing, not demand, determines actual capital flows.
- Informational asymmetries play a significant role in conditioning capital flows, distinct from default risk.
- The study links observed curtailments of capital flows to movements in underlying fundamentals via the short-side market mechanism.
Subjects and keywords
- 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
Content in this bundle
- International Capital Crunches: The Time-Varying Role of Informational Asymmetries - WP/02/43