Central Bank of Chile paper examines transmission of shocks
A working paper published by the Central Bank of Chile in June examines how investors and fund managers react to shocks, and how the resulting impact on capital flows transmits these shocks between countries.
The authors, Claudio Raddatz and Sergio Schmukler, use data from 1,076 equity and bond funds over a period of 15 years to assess the impact of investor decisions on a micro level. They find mutual fund assets fluctuate "substantially and pro-cyclically" over time. "Their behaviour seems to
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