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Capital Flows are Fickle : Anytime, Anywhere

Author/Editor: John C Bluedorn | Rupa Duttagupta | Jaime Guajardo | Petia Topalova
Authorized for Distribution: August 22, 2013
Electronic Access: Free Full Text (PDF file size is 715KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt.
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Series: Working Paper No. 13/183
Subject(s): Capital flows | Globalization | Developed countries | Developing countries | Cross country analysis
    Published:   August 22, 2013        
    ISBN/ISSN:   9781484389041/1018-5941   Format:   Paper
    Stock No:   WPIEA2013183   Pages:   37
    Price:   US$18.00
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