Mody, Ashoka and Taylor, Mark P., 1958- (2003) International capital crunches: the time-varying role of informational asymmetries. Discussion Paper. Centre for Economic Policy Research (Great Britain), London.

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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.

Item Type:	Working or Discussion Paper (Discussion Paper)
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Capital movements, Equilibrium (Economics), Information asymmetry, Rationing
Series Name:	Discussion paper (Centre for Economic Policy Research (Great Britain))
Publisher:	Centre for Economic Policy Research (Great Britain)
Place of Publication:	London
Date:	February 2003
Number:	No.375
Number of Pages:	27
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/1680

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