The Volatility of Capital Flows in Emerging Markets: Measures and Determinants

By Maria Sole Pagliari, Swarnali A Hannan

March 7, 2017

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Maria Sole Pagliari, and Swarnali A Hannan. The Volatility of Capital Flows in Emerging Markets: Measures and Determinants, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Capital flow volatility is a concern for macroeconomic and financial stability. Nonetheless, literature is scarce in this topic. Our paper sheds light on this issue in two dimensions. First, using quarterly data for 65 countries over the period 1970Q1-2016Q1, we construct three measures of volatility, for total capital flows and key instruments. Second, we perform panel regressions to understand the determinants of volatility. The measures show that the volatility of all instruments is prone to bouts, rising sharply during global shocks like the taper tantrum episode. Capital flow volatility thus remains a challenge for policy makers. The regression results suggest that push factors can be more important than pull factors in explaining volatility, illustrating that the characteristics of volatility can be different from those of the flows levels.

Subject: Balance of payments, Capital flows, Capital inflows, Economic and financial statistics, Financial crises, Financial statistics, Global financial crisis of 2008-2009, Oil prices, Prices

Keywords: Capital flow, Capital flow movement, Capital flow volatility, Capital flows, Capital inflows, Cross border, Cross border capital, Estimation outcome, Financial, Financial statistics, Flow volatility, Flows to emdes, Global, Global financial crisis of 2008-2009, International Flows, Oil prices, Portfolio flow, Standard deviation, Volatility estimate, Volatility Estimation, Volatility in emdes, Volatility measure, Volatility of capital flow, WP

Publication Details

Pages:

58
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/041
Stock No:

WPIEA2017041
ISBN:

9781475585254
ISSN:

1018-5941

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