Predicting Currency Fluctuations and Crises: Do Resident Firms Have an Informational Advantage?
The Brookings Institution
International Monetary Fund (IMF)
Sergio L. Schmukler
World Bank - Development Research Group (DECRG)
Journal of International Money and Finance, Forthcoming
This paper investigates whether resident enterprise managers have an informational advantage about the countries where they work. We test this informational advantage hypothesis by using a unique dataset, the Global Competitiveness Survey. The findings suggest that local managers do have valuable information about the country where they reside. Local managers' responses improve conventional estimates of future volatility and changes in the exchange rate, which are based on economic fundamentals. These findings provide support to the theories that claim that asymmetric information is present in international financial markets and is important to understand financial crises.
Number of Pages in PDF File: 33
Keywords: Expectations, asymmetric information, local investors, financial crises, exchange rates fluctuations, prediction, survey
JEL Classification: F3, F4, G1Accepted Paper Series
Date posted: January 15, 2004
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