TY  - GEN
AB  - We develop a new theory of international capital flows based on dispersed information across individual investors. There is extensive evidence of information heterogeneity within and across countries, which has proven critical to understanding asset price behavior. We introduce information dispersion into an open economy dynamic general equilibrium portfolio choice model, and emphasize two implications for capital flows that are specific to the presence of dispersed information. First, gross and net capital flows become partially disconnected from publicly observed fundamentals. Second, capital flows (particularly gross flows) contain information about future fundamentals, even after controlling for current fundamentals. We find that these implications are quantitatively significant and consistent with data for industrialized countries.
AU  - Wincoop, Eric van
AU  - Tille, Cédric
CY  - Cambridge, MA
DA  - 2008
DA  - 2008
DO  - 10.3386/W14390
DO  - doi
ID  - 295143
L1  - https://repository.graduateinstitute.ch/record/295143/files/w14390.pdf
L2  - https://repository.graduateinstitute.ch/record/295143/files/w14390.pdf
L4  - https://repository.graduateinstitute.ch/record/295143/files/w14390.pdf
LK  - https://repository.graduateinstitute.ch/record/295143/files/w14390.pdf
N2  - We develop a new theory of international capital flows based on dispersed information across individual investors. There is extensive evidence of information heterogeneity within and across countries, which has proven critical to understanding asset price behavior. We introduce information dispersion into an open economy dynamic general equilibrium portfolio choice model, and emphasize two implications for capital flows that are specific to the presence of dispersed information. First, gross and net capital flows become partially disconnected from publicly observed fundamentals. Second, capital flows (particularly gross flows) contain information about future fundamentals, even after controlling for current fundamentals. We find that these implications are quantitatively significant and consistent with data for industrialized countries.
PB  - National Bureau of Economic Research
PP  - Cambridge, MA
PY  - 2008
PY  - 2008
T1  - International capital flows under dispersed informationtheory and evidence
TI  - International capital flows under dispersed informationtheory and evidence
UR  - https://repository.graduateinstitute.ch/record/295143/files/w14390.pdf
Y1  - 2008
ER  -