NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Capital Flows under Dispersed Information: Theory and Evidence

Cédric Tille, Eric van Wincoop

NBER Working Paper No. 14390
Issued in October 2008
NBER Program(s):   AP   IFM

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.

download in pdf format
   (380 K)

email paper

This paper is available as PDF (380 K) or via email.

An online appendix is available for this publication.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14390

Users who downloaded this paper also downloaded these:
van Wincoop and Tille w12856 International Capital Flows
Favilukis, Kohn, Ludvigson, and Van Nieuwerburgh w17751 International Capital Flows and House Prices: Theory and Evidence
Kirabaeva and Razin w16492 Composition of Capital Flows: A Survey
Kirabaeva and Razin w15599 Composition of International Capital Flows: A Survey
Gourinchas and Jeanne w13602 Capital Flows to Developing Countries: The Allocation Puzzle
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us