Uniform Standards, Information Quality, and Capital Flows

This paper examines the impact of uniform standards from an economy's perspective in the presence of capital crunches and economic shocks. We show that converting to uniform standards benefits some economies but may be detrimental to other economies, and the impact is determined by the joint effects of the difference in information quality, as well as capital endowments across economies. Our analysis indicates that economies with high information quality benefit from uniform standards when the capital crunch is severe, but may suffer if the capital crunch is relatively mild. We also show that a wealthy economy with a large capital endowment may be put at a disadvantage by converting to uniform standards. In addition, we find that improving information quality in one economy may have a positive or negative externality on other economies under uniform standards. Our analysis provides potential regulatory implications for standards setters and empirical implications for future research, and may help to inform the debates about uniform standards.