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N° 2006-19 |
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| December 2006 |
| Institutions and Bilateral Asset Holdings |
Véronique Salins
Agnès Bénassy-Quéré |
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| Since the late 1990s, developing countries as a whole have become net exporters of
capital, a pattern which contradicts neoclassical models but can be explained by investors
risk aversion. Because they can be seen as a major determinant of country
risk, institutional features of target countries are then expected to impact on international
portfolio choices. This paper explores the institutional determinants of international
portfolio allocation. We rely on bilateral portfolio investment data together
with the newly released Institutional Profiles database which details institutional features
for 51 countries. We find that a number of institutional variables do impact on
portfolio investment, especially competition and public liberties. |
Abstract |
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| Portfolio investment; gravity model; institutions; developing countries |
Keywords |
| F21, O17 |
JEL classification |
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