Country transparency and the global transmission of financial shocks

Luis Brandao-Marques, Gaston Gelos, Natalia Melgar

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

This paper considers the role of country-level opacity (the unavailability of information) in amplifying shocks emanating from financial centers. We provide a simple model where, in the presence of ambiguity about fundamentals (uncertainty about the probability distribution of returns), prices in periphery markets react more strongly to signals from the financial center, the more opaque the periphery market is. The second contribution is empirical evidence for more than 60 bond and equity markets in line with this prediction. Increasing the availability of information about public policies, improving accounting standards, and enhancing disclosure by governments and firms can reduce the response of peripheral asset markets to shocks from global financial centers.

Original languageEnglish
Pages (from-to)56-72
Number of pages17
JournalJournal of Banking and Finance
Volume96
DOIs
StatePublished - Nov 2018

Keywords

  • Transmission of global financial shocks
  • Transparency

Fingerprint

Dive into the research topics of 'Country transparency and the global transmission of financial shocks'. Together they form a unique fingerprint.

Cite this