Do investors disproportionately shed assets of distant countries during global financial crises? [E-Book]: The role of increased uncertainty / Rudiger Ahrend and Cyrille Schwellnus
The global crisis of 2008-09 went hand in hand with sharp fluctuations in capital flows. To some extent, these fluctuations may have been attributable to uncertainty-averse investors indiscriminately selling assets about which they had poor information, including those in geographically distant loca...
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Full text |
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Personal Name(s): | Ahrend, Rudiger, author |
Schwellnus, Cyrille, author | |
Imprint: |
Paris :
OECD Publishing,
2013
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Physical Description: |
20 p. |
Note: |
englisch |
DOI: |
10.1787/eco_studies-2012-5k4dpmw9hphc |
Keywords: |
Economics |
The global crisis of 2008-09 went hand in hand with sharp fluctuations in capital flows. To some extent, these fluctuations may have been attributable to uncertainty-averse investors indiscriminately selling assets about which they had poor information, including those in geographically distant locations. Using a gravity equation setup, this article shows that the impact of distance increases with investors’ uncertainty aversion. Consistent with a sudden increase in uncertainty, the negative impact of distance on foreign holdings increased during the global financial crisis of 2008-09. Host-country structural policies enhancing the quality of information available to foreign investors, such as strict disclosure requirements and prudential bank regulation, tended to mitigate withdrawals. |