Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper considers the role of country-level opacity (the unavailability of information) in amplifying shocks emanating from financial centers. We provide a simple model where, in the presence of ambiguity about fundamentals (uncertainty about the probability distribution of returns), prices in periphery markets react more strongly to signals from the financial center, the more opaque the periphery market is. The second contribution is empirical evidence for more than 60 bond and equity markets in line with this prediction. Increasing the availability of information about public policies, improving accounting standards, and enhancing disclosure by governments and firms can reduce the response of peripheral asset markets to shocks from global financial centers.