Capital Flows are Fickle: Anytime, Anywhere

Bluedorn, John; Duttagupta, Rupa; Guajardo, Jaime; Topalova, Petia

doi:10.2139/ssrn.2324178

Cited by 27 publications

(28 citation statements)

References 15 publications

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“…I will use the terms capital inflows and capital flows interchangeably throughout the paper as refereing to actions of foreign investors. In EMEs, net capital flows (capital inflows by foreigners (liabilities) minus capital outflows by domestic residents (assets)-equivalently the current account with a reverse sign) are mainly driven by the actions of foreign investors (Bluedorn et al (2013), andAvdjiev et al (2019)). These capital inflows can be positive or negative during any given quarter, as foreign investors can increase or reduce their financial exposures to a given country.…”

Section: Monetary Policy Divergence Capital Flows and Risk Premiamentioning

confidence: 99%

U.S. Monetary Policy and International Risk Spillovers

Kalemli‐Özcan

2019

112

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provided valuable comments on the final draft. I am grateful to Helene Rey for her insightful discussion. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Monetary Policy Divergence Capital Flows and Risk Premiamentioning

confidence: 99%

U.S. Monetary Policy and International Risk Spillovers

Kalemli‐Özcan

2019

112

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“…Milesi-Ferretti and Tille (2011) and Cerutti et al (2015) separate out the banking sector within the other investment debt category of the BOP to analyze it on its own, but not in tandem with the other sectors and other capital flow asset classes. Other studies examining gross capital inflows using only BOP data sometimes exclude official reserves and IMF credit (and sometimes central bank loans) in order to focus on pri- vate inflows (see Forbes and Warnock (2012), Bluedorn, Duttagupta, Guajardo, andTopalova (2013), andTille (2011), Bluedorn et al (2013), for example). Given the substantial amount of public sector debt under portfolio securities, the above studies will still have public flows as they do not separate portfolio debt into private and public sectors.…”

Section: A New Dataset For Capital Flows Researchmentioning

confidence: 99%

Gross Capital Flows by Banks, Corporates, and Sovereigns

Avdjiev

Hardy

Kalemli‐Özcan

et al. 2022

Journal of the European Economic Association

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We construct a new quarterly data set of international capital flows broken down by sector - banks, corporates and sovereigns - and demonstrate the importance of distinguishing capital flows by the sector of domestic borrowers and lenders. We document four new sets of facts. First, banks account for the largest part of the external debt (stocks and flows) in advanced economies, whereas in emerging markets, banks, corporates and sovereigns have roughly equal shares. Second, the high correlation between total capital inflows and outflows documented in the literature is driven by banking sector flows; that is, domestic banks’ borrowing from foreigners is highly correlated with domestic banks’ lending to foreigners. Third, sovereign flows behave very differently from and often act as a countervailing force to private sector (banking and corporate) flows, especially in emerging markets. Fourth, different shocks (global financial cycles vs. domestic business cycles; banking vs. currency vs. sovereign crises) generate very distinct patterns of capital inflows and outflows by sector. The stylized facts we document deepen our understanding of the dynamics and behavior of capital flows, and have important implications for open economy models.

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“…We opine that the source of instability is related to capital flow dynamics and by extension, the GFCy. Capital flow literature has shown that the dynamics of capital flows has changed overtime (Bluedorn, Duttagupta, Guajardo, & Topalova, 2013;Pagliari & Hannan, 2017). Of the various ways of accounting for instability, this study favours Time-Varying Parameters (TVP).…”

Section: Introductionmentioning

confidence: 97%

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

Raheem

2020

Int. J Fin Econ

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The exchange rate disconnect puzzle argues that macroeconomic fundamentals are not able to accurately predict exchange rate. Recent studies have shown that the puzzle could be upturned if: (i) the dataset is structured in a panel form; (ii) the model is based on the portfolio balance theory (PBT); (iii) factor models are employed and (iv) time-varying parameter (TVP) regression is used. This study combines these strands of the literature. Essentially, the study conjectures that Global Financial Cycle (GFCy), drawing inspiration from PBT, has some predictive information content on exchange rate. Using dataset for 25 countries, we produced some mixed results. On the whole, the GFCy is able to produce lower forecast error, as compared to the benchmark model. However, its effectiveness is dependent upon the regression type (TVP vs Panel Fixed Effect); forecast horizons (short vs long); the sample period (early vs. late) and measures of GFCy. The results are robust to a number of checks.

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Capital Flows are Fickle: Anytime, Anywhere

Cited by 27 publications

References 15 publications

U.S. Monetary Policy and International Risk Spillovers

U.S. Monetary Policy and International Risk Spillovers

Gross Capital Flows by Banks, Corporates, and Sovereigns

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

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