Ambiguity, Transparency, and Institutional Strength [electronic resource] / S. Nuri Erbas.
Material type: TextSeries: IMF Working Papers; Working Paper ; No. 04/115Publication details: Washington, D.C. : International Monetary Fund, 2004Description: 1 online resource (32 p.)ISBN: 1451853890 :ISSN: 1018-5941Subject(s): Ambiguity | Analysis of Collective Decision-Making: General | Criteria for Decision-Making Under Risk and Uncertainty | Expected Value | Firm Organization and Market Structure | Institutions | Italy | United Kingdom | United StatesAdditional physical formats: Print Version:: Ambiguity, Transparency, and Institutional StrengthOnline resources: IMF e-Library | IMF Book Store Abstract: Institutional transparency makes future contingencies more easily predictable for investors. Greater transparency can be achieved through vertical and horizontal integration of policy rules, which may result in lower Knightian uncertainty (ambiguity). In a model based on cumulative prospect theory, for a given probability and payoff structure, expected return on investment is higher in more transparent countries; therefore, those countries attract more investment and grow faster than less transparent countries. Lower transparency may result in inherently higher volatility.Institutional transparency makes future contingencies more easily predictable for investors. Greater transparency can be achieved through vertical and horizontal integration of policy rules, which may result in lower Knightian uncertainty (ambiguity). In a model based on cumulative prospect theory, for a given probability and payoff structure, expected return on investment is higher in more transparent countries; therefore, those countries attract more investment and grow faster than less transparent countries. Lower transparency may result in inherently higher volatility.
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