Capital flow waves: Surges, stops, flight, and retrenchment

Forbes, Kristin J.; Warnock, Francis E.

doi:10.1016/j.jinteco.2012.03.006

Cited by 1,242 publications

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“…As in the conceptual framework of Forbes and Warnock (2012), the probability of a GF-led and M&A-led surge or stop depends on three sets of factors-global, contagion (regional), and domestic (Calvo et al 1996;Fernandez-Arias and Montiel 1996;Dell'Erba and Reinhardt 2012;and Forbes and Warnock 2012). 14 Hence, to 14 Forbes and Warnock (2012) review several large empirical and theoretical bodies of literature to identify a parsimonious list of factors that might be associated with capital flow waves. They group these factors into global factors such as global risk, liquidity, interest rates, and growth; contagion factors through trade, finance and geographic proximity linkages; and domestic factors such as a country's financial market development, integration with global financial markets, fiscal position, and growth shocks.…”

Section: Conceptual Approach and Variablesmentioning

confidence: 99%

“…Several studies compare different types of financial flow events (e.g., Sula 2010;Cardarelli et al 2010;Agosin and Huaita 2012;Forbes and Warnock 2012;Furceri et al 2012;Ghosh et al 2012), but to our knowledge, none looks separately at the incidence and determinants of GF-led and M&A-led stops and surges in FDI flows to the developing world. The distinction is important for a number of reasons.…”

Section: Introductionmentioning

confidence: 99%

“…2 GF-led and M&A-led FDI surges and stops: definitions and incidence Using UNCTAD data on gross FDI inflows from the World Investment Report (UNCTAD 2011) and building on the work by Calvo et al (2004), Reinhart (2009), andForbes andWarnock (2012), we define a surge episode as an increase in inflows in a given year that is more than one standard deviation above the country-specific (5-year rolling) average. 9 The surge episode begins when the FDI-to-GDP ratio increases more than one standard deviation above its rolling mean and ends when the FDI-to-GDP ratio falls below one standard deviation above its rolling mean.…”

Section: Introductionmentioning

confidence: 99%

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Surges and stops in greenfield and M&A FDI flows to developing countries: analysis by mode of entry

Burger

Ianchovichina

2017

Rev World Econ

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This paper investigates the factors associated with foreign direct investment ''surges'' and ''stops'', defined as sharp increases and decreases, respectively, of foreign direct investment inflows to the developing world and differentiated based on whether these events are led by waves in greenfield investments or mergers and acquisitions. Greenfield-led surges and stops occur more frequently than mergers-and-acquisitions-led ones and different factors are associated with the onset of the two types of events. Global liquidity is the factor significantly and positively associated with a surge, regardless of its kind, while a global economic growth slowdown and a surge in the preceding year are the main factors associated with a stop. Greenfield-led surges and stops are more likely in low-income countries and mergers-and-acquisitions-led surges are less likely in resource-rich countries than elsewhere in the developing world. Global growth accelerations and increases in financial openness, domestic economic and financial instability are associated with mergers-and-acquisitions-led surges but not with greenfield-led ones. These results are particularly relevant for developing countries where FDI flows are the major type of capital flows and suggest that developing countries' macroeconomic vulnerability increases following periods of increased global liquidity. As countries Electronic supplementary material The online version of this article

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Section: Conceptual Approach and Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Surges and stops in greenfield and M&A FDI flows to developing countries: analysis by mode of entry

Burger

Ianchovichina

2017

Rev World Econ

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“…in Section 2). At a general level, periods of enhanced global risk are associated with much smaller volumes of gross capital flows (Forbes and Warnock 2012), as investors refrain from making international commitments and seek to pull back from accumulated positions that were built up during normal times but look outsized in a higher-risk environment.…”

Section: Financial Globalisation: Crisis Amplifiers and Crisis Buffersmentioning

confidence: 99%

Financial Globalisation and the Crisis

Lane

2012

Open Econ Rev

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The global financial crisis provides an important testing ground for the financial globalisation model. We ask three questions. First, did financial globalisation materially contribute to the origination of the global financial crisis? Second, once the crisis occurred, how did financial globalisation affect the incidence and propagation of the crisis across different countries? Third, how has financial globalisation affected the management of the crisis at national and international levels?

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“…According to this literature, the gross ‡ows composing a country´s net capital in ‡ow react dissimilarly to di¤erent factors. Along these lines, Forbes and Warnock (2012) and Broner et al (2013) show that resident and foreign investors' reaction functions are distinct. 2 These papers demonstrate that gross capital ‡ows are very large and volatile, especially relative to net capital ‡ows.…”

Section: Introductionmentioning

confidence: 96%

Catalytic IMF? A Gross Flows Approach

Erce¹,

Riera‐Crichton

2015

gwp

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The financial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic effect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital inflow to study instead the IMF's catalytic role in the context of gross capital flows. Using fixed-effects regressions, instrumental variables and local projection methods, we find significant differences in how resident and foreign investors react to IMF programs as well as in inward and outward flows. While IMF lending does not catalyze foreign capital, it does affect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' flows drive this effect, we conclude that IMF catalysis is "a banking story". In comparing the effects across crisis types, we find that the effect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least effect on foreign investors during bank crises. AbstractThe …nancial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic e¤ect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital in ‡ow to study instead the IMF's catalytic role in the context of gross capital ‡ows. Using …xed-e¤ects regressions, instrumental variables and local projection methods, we …nd signi…cant di¤erences in how resident and foreign investors react to IMF programs as well as in inward and outward ‡ows. While IMF lending does not catalyze foreign capital, it does a¤ect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' ‡ows drive this e¤ect, we conclude that IMF catalysis is "a banking story". In comparing the e¤ects across crisis types, we …nd that the e¤ect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least e¤ect on foreign investors during bank crises.

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Capital flow waves: Surges, stops, flight, and retrenchment

Cited by 1,242 publications

References 84 publications

Surges and stops in greenfield and M&A FDI flows to developing countries: analysis by mode of entry

Surges and stops in greenfield and M&A FDI flows to developing countries: analysis by mode of entry

Financial Globalisation and the Crisis

Catalytic IMF? A Gross Flows Approach

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