## _wp13183

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---

### Background and purpose
- Investigates whether the behavior of capital flows has fundamentally changed over time or across countries, focusing on volatility, persistence, composition, and sensitivity to global conditions.
- Sample: 147 economies during 1980–2011 (annual) and 58 countries at a quarterly frequency.
- Distinguishes gross and net private capital flows; private flows exclude changes in recorded reserves, IMF lending, and other flows where the official sector is recorded as a counterparty.
- Aims to:
  - (i) present a detailed database of private capital flows;
  - (ii) assess gross versus net flows while adjusting for rising size of gross flows;
  - (iii) examine behavior of capital flows around periods characterized by relatively low global interest rates.

### Data and definitions
- Capital flows defined per BPM5 and measured in nominal U.S. dollars, normalized by nominal GDP in U.S. dollars (WDI extended with WEO).
- Components: (1) foreign direct investment (FDI); (2) portfolio investment (equity and debt); (3) financial derivatives; (4) international reserves; (5) “other investment” (includes loans, deposits, banking capital, trade credits, and official government flows).
- Private capital flows proxied by excluding flows to general government and monetary authorities within “other investment”; “bank flows” used to describe private banking-sector-dominated other investment.
- Quarterly data available for 58 economies; semiannual presentation used from 2008H1 onward in some charts.

### Key statistical and descriptive findings
- Gross capital flows have grown substantially:
  - For advanced economies, gross flows rose five-fold from 5 percent of GDP in the 1980s to 25 percent of GDP in the run up to the Great Recession.
  - For emerging markets, gross flows increased from 2½ percent of GDP in the 1980s to 12 percent of GDP during the same period.
- Net flows:
  - Advanced economies: net flows largely stable at less than 2 percent of GDP over the past thirty years.
  - Emerging markets: net flows rose from 2 percent of GDP in the 1980s–1990s to 4 percent of GDP before the Great Recession.
- Persistence and predictability:
  - Net flows exhibit low persistence with AR(1) regression coefficients typically below one-half.
  - Gross inflows AR(1) coefficients generally between 0.5–0.6.
- Sensitivity to global conditions:
  - For emerging markets, total net inflows are 2 percent of GDP higher when global financing conditions are easy than when they are not.
  - Periods of low global interest rates, low global risk aversion, and strong emerging-market growth often overlap, notably in the run-up to the Asian crisis (1991–96, excluding 1994 and 1995 for specific reasons) and the run-up to the global crisis (2004–07).

### Volatility (measures and patterns)
- Two volatility measures used:
  - Standard deviation of detrended private capital flows as a share of GDP.
  - Coefficient of variation (standard deviation scaled by absolute value of the mean).
- General results:
  - Capital flows across all economy groups and most flow types exhibit volatility—with standard deviations for the median country typically much higher than average levels.
  - As gross capital flows grew, their standard deviation rose everywhere; but adjusting for size, the volatility of each incremental unit of gross and net flows (relative to GDP) for the median country is broadly similar across economy groups and has declined over time for emerging markets.
  - FDI is relatively stable across groups and over time; FDI (gross or net) has lower coefficient of variation than other flow types.
  - There is little significant difference in volatility between portfolio and bank-related flows after controlling for size.
- Representative tabulated medians (1980–2011) for the median country (selected entries from Tables 1A and 1B):
  - Net flows: median means — Advanced 0.71; Emerging 2.24; Other Developing 2.31.
  - Net flows: median standard deviations — Advanced 3.25; Emerging 4.05; Other Developing 3.81.
  - Gross inflows: median means — Advanced 7.37; Emerging 3.80; Other Developing 3.40.
  - Gross inflows: median standard deviations — Advanced 7.91; Emerging 4.10; Other Developing 3.65.
  - Gross outflows: median means — Advanced -6.44; Emerging -1.71; Other Developing -0.99.
  - Gross outflows: median standard deviations — Advanced 7.10; Emerging 2.20; Other Developing 2.06.
- Rolling-window evidence:
  - Standard deviations of gross inflows/outflows rose over time with volume; coefficients of variation for inflows to emerging markets are similar now to those for advanced economies.

### Substitutability and comovement across flows
- Advanced economies:
  - Strong negative correlations between net flows in each instrument and the remainder of the financial account—indicative of substitutability across instruments.
  - Greater complementarity of gross inflows and outflows; higher comovement between inflows and outflows (median correlation of total private capital flows inflows vs outflows = 0.90 *).
- Emerging and other developing economies:
  - Substitutability across components of net capital flows largely absent; net flows move more in tandem with gross inflows.
  - Positive comovement between inflows and outflows exists but with smaller median correlations (total private capital flows inflows vs outflows: Emerging 0.35 *; Other Developing 0.26 *).
- Specific median correlations (Table 2 and Table 3 highlights):
  - Advanced: FDI & Portfolio Equity (net) median correlation -0.36 *; Portfolio Debt & Other Investment (net) -0.40 *.
  - Advanced: inflows vs outflows median correlations — Total Private Capital Flows 0.90 *; FDI 0.64 *; Other Investment 0.69 *.
  - Emerging: inflows vs outflows median correlations — Total Private Capital Flows 0.35 *; FDI 0.30 *; Other Investment 0.18 *.

### Persistence (AR(1)) and instrument differences
- Median AR(1) persistence estimates (1980–2011, Table 4):
  - Net total private flows: Advanced 0.43; Emerging 0.48; Other Developing 0.44.
  - Gross inflows: Advanced 0.62; Emerging 0.54; Other Developing 0.52 *.
  - Gross outflows: Advanced 0.58; Emerging 0.36 *; Other Developing 0.18 *.
- Instrumental patterns:
  - FDI generally more persistent (especially in emerging and other developing economies) than portfolio equity or portfolio debt.
  - Persistence of FDI in emerging markets has fallen over time, with some reversal since the decades ending in the mid-2000s (possible link to rising share of financial FDI).

### Cyclicality with domestic GDP growth
- Correlations with domestic real GDP growth (median country, Table 5):
  - Net flows: Advanced -0.04; Emerging 0.25 *; Other Developing 0.08.
  - Gross inflows: Advanced 0.26; Emerging 0.32; Other Developing 0.12 *.
  - Gross outflows: Advanced -0.26; Emerging -0.12 *; Other Developing -0.08 *.
- Interpretation:
  - Emerging market net flows are mildly procyclical with domestic GDP growth; advanced economies show no evidence of procyclicality in total net private flows.
  - For advanced economies, gross inflows and outflows both rise during good times, offsetting effects on net flows.

### Capital flows under alternative global conditions (push/pull scenarios)
- Definitions:
  - Low global interest rates: global real interest rate below its 1980–2011 median (weighted average ECB/Bundesbank prior to 1999, and U.S. real federal funds rate).
  - Low global risk aversion: VIX level below its 1980–2011 median.
  - High emerging-minus-advanced growth differential: growth differential above its 1980–2011 median.
- Historical overlaps:
  - Most periods of low global interest rates overlapped with large growth differentials but not always with low global risk aversion.
  - Two extended episodes when all three conditions coincided: run-up to the Asian crisis (1991–96, excluding 1994 and 1995 for specific reasons) and run-up to the global crisis (2004–07).
- Effects on emerging markets:
  - Total net capital flows during events larger than the year before or after; largest when all three conditions coincide.
  - Net flows increased most around periods of low risk aversion: increased by 2¼ percentage points of GDP from the year preceding the period and fell by 1¼ percentage points afterward (Figure 11 caption descriptive magnitudes).
  - Net flows to emerging markets are more than 2 percentage points of GDP higher when global interest rates and risk aversion are low than when either or both are high (Figure 12 summary).
  - Bank flows drive much of the rise and fall in these episodes; bank flows are strongly correlated with changes in global risk aversion.
  - Gross outflows rise but are too small to offset gross inflows—net flows largely driven by foreign investors.
- Effects on advanced economies:
  - Net flows are lowest (relative to before/after) when global risk aversion is low in some scenarios; advanced economies attract more net flows when risk appetite is low.
  - Gross inflows and gross outflows both increase when risk aversion is low, implying domestic residents’ investment abroad rises alongside foreign investment inwards; net flows thus more stable.
  - Portfolio debt and bank flows are important drivers of dynamics for advanced economies under alternative scenarios.

### Conclusions and policy implications
- Core regularities:
  - Capital flow volatility and low persistence are pervasive across advanced, emerging market, and developing economies.
  - Increasing volatility over time is largely driven by the rising volume of gross flows; each incremental unit of flow relative to GDP is not becoming more volatile.
  - Advanced economies exhibit greater substitutability across net flow components and stronger complementarity between inflows and outflows, partly explaining similar total net-flow volatility across groups.
  - FDI tends to be less volatile and more persistent than other flow types.
  - Easy global financing conditions (low interest rates and low risk aversion) are associated with temporary tides of capital flows, led by gross inflows; for emerging markets, net flows are driven mainly by foreign inflows because gross outflows are too small to offset inflows.
- Policy takeaways:
  - High variability and low predictability of capital flows are a fact of life under financial globalization; policymakers across all economies need to manage and live with this volatility.
  - Macroeconomic and macroprudential tools that bolster economic and financial resilience are necessary to cope with volatile cross-border flows.
  - Greater two-way capital flow volatility may arise as emerging markets diversify residents’ investment abroad; such diversification can provide a natural hedge to manage capital flow variability.

### Appendix I. Definition of Country Groups (high-level)
- Classification into three economy groups--advanced, emerging, and other developing economies (see Appendix Table 1).
- Advanced economies correspond to the IMF 1990 WEO definition of industrial economies, or the member countries of the OECD before 1990, with the exception of Turkey.
- Emerging economies follow IMF (2011b) regional classifications, excluding low-income economies eligible for the IMF’s Poverty Reduction and Growth Trust and relatively small economies (nominal GDP average 1990–2009 below the median for emerging and developing economies in the sample).
- All other economies defined as other developing economies (ODEs).
- Excludes offshore financial centers as defined by the Financial Stability Forum.

### Appendix Table 1. Economy Groupings (selected entries; * indicates quarterly-sample economies)
- Advanced Economies (selected): Austral i a (193); Austri a (122); Be l gi um (124); Canada (156); De nmark (128); Finland (172); France (132); Ge rmany (134); Gre e ce (174); Ice l and (176); Ire l and (178); Ital y (136); Japan (158); Uni te d Ki ngdom (112); Uni te d State s (111); Romani a (968); Slovak Republic (936); Slovenia (961); Turke y (186); Oman (449); Paki stan (564); Russi a (922); Saudi Arabi a (456); South Af ri ca (199); Syria Arab Republic (463); Tuni si a (744); Ukrai ne (926); Uni te d Arab Emi rate s (466); Swaziland (734); Tanzani a (738); Uganda (746); V i e tnam (582).
- Emerging Asia (selected): *Chi na (924); *Hong Kong SAR (532); *Indi a (534); *Indone si a (536); *Kore a (542); *Malaysia (548); *Phi l i ppi ne s (566); *Si ngapore (576); *Sri Lanka (524); *Tai wan Provi nce of Chi na (528); *Thai l and (578); *Pe ru (293) [listed under Emerging Asia in source layout].
- Emerging Europe (selected): *Bul gari a (918); *Croati a (960); *Cyprus (423); *Cze ch Re publ i c (935); *Estoni a (939); *Hungary (944); *Latvi a (941); *Li thuani a (946); *Mal ta (181); *Pol and (964); Romani a (968); Slovak Republic (936); Slovenia (961).
- Emerging Latin America (selected): *Arge nti na (213); *Brazi l (223); *Chi l e (228); *Col ombi a (233); *Costa Ri ca (238); *Dominican Republic (243); *Ecuador (248); *El Sal vador (253); *Guate mal a (258); *Me x i co (273); *Panama (283); Uruguay (298); *V e ne zue l a (299).
- Other Developing Economies (selected): *Al bani a (914); *Anti gua and Barbuda (311); *Bahrai n (419); *Bangl ade sh (513); *Barbados (316); Bolivia (218); *Botswana (616); *Came roon (622); *Cape V e rde (624); *Côte d'Ivoi re (662); Domi ni ca (321); *Ethi opi a (644); *Fi ji (819); Ghana (652); *Gre nada (328); Haiti (263); Honduras (268); Jamai ca (343); *Ke nya (664); *Le sotho (666); *Mal di ve s (556); *Mauri ti us (684); *Mozambi que (688); Ne pal (558); Nicaragua (278); Nigeria (694); *Papua Ne w Gui ne a (853); Rwanda (714); *Se yche l l e s (718); Si e rra Le one (724); *Sol omon Isl ands (813); St. Kitts and Nevis (361); St. Luci a (362); St. V i nce nt and the Gre nadi ne s (364); Suri name (366); Swaziland (734); Tanzani a (738); Ug anda (746); V i e tnam (582).

*Source: _wp13183 - REFERENCES*

### References .............................................................................................................

### _wp13183 - References .............................................................................................................

### Tables (Inventory)
- 1A. The Net Capital Flows in percent GDP: Volatility ...........................................................13
- 1B. Gross Capital Inflows and Outflows in percent GDP: Volatility ......................................14
- 2. Capital Flows: Correlations Across Types of Flow .............................................................20
- 3. Capital Flows: Correlations Between Inflows and Outflows ..............................................20
- 4. Capital Flows in percent GDP: Persistence .........................................................................21
- 5. Capital Flows in percent GDP: Correlation with GDP Growth ...........................................24
- Appendix Table 1: Economy Groupings .................................................................................36

### Figures (Inventory)
- 1. Cross Border Capital Flows ...................................................................................................4
- 2. Greece: Composition of Gross and Net Capital Flows ..........................................................9
- 3. The Evolution of Total Gross and Net Capital Flows ..........................................................10
- 4. The Collapse and Recovery of Capital Flows by Type .......................................................11
- 5. Volatility of Capital Flows: Standard Deviation .................................................................15
- 6. Rolling Coefficient of Variation by Type of Flow ..............................................................16
- 7. Correlations between Flows of Various Types and the Rest of the Financial Account ......19
- 8. Rolling Persistence of Capital Flows ...................................................................................22
- 9. Rolling Persistence by Type of Flow ...................................................................................23
- 10. Capital Flows in Periods of Easy Global Financing Conditions........................................25
- 11. Emerging Market Economies: Net Capital Flows .............................................................26
- 12. Emerging Market Economies: Net Private Capital Flows Under Alternate  
          Global Financing Conditions  ........................................................................................27
- 13. Advanced Economies: Net Capital Flows .........................................................................28
- 14. Advanced Economies: Net Capital Flows Under Alternate  
          Global Financing Conditions .........................................................................................29
- 15. Emerging Market Economies: Gross Capital Inflows  ......................................................30
- 16. Advanced Economies : Gross Capital Inflows ..................................................................31

### Document structure and ancillary sections
- References ................................................................................................................................33
- VI. Appendix I. Definition of Country Groups........................................................................35

### Introduction (excerpted text preserved exactly)
- International capital flows have been on a roller-coaster ride for the past few decades. Both advanced and emerging market economies experienced a remarkable surge in gross capital inflows from the mid-1990s through the first half of the 2000s (Figure 1; see Appendix I and

*Source: _wp13183 - References .............................................................................................................*

### Appendix Table 1 for the composition

### Appendix Table 1 for the composition

### Background and purpose
- Investigates whether the behavior of capital flows has fundamentally changed over time or across countries, focusing on volatility, persistence, composition, and sensitivity to global conditions.
- Sample: 147 economies during 1980–2011 (annual) and 58 countries at a quarterly frequency.
- Distinguishes gross and net private capital flows; private flows exclude changes in recorded reserves, IMF lending, and other flows where the official sector is recorded as a counterparty.
- Aims to: (i) present a detailed database of private capital flows; (ii) assess gross versus net flows while adjusting for rising size of gross flows; (iii) examine behavior of capital flows around periods characterized by relatively low global interest rates.

### Data and definitions
- Capital flows defined per BPM5 and measured in nominal U.S. dollars, normalized by nominal GDP in U.S. dollars (WDI extended with WEO).
- Components: (1) foreign direct investment (FDI); (2) portfolio investment (equity and debt); (3) financial derivatives; (4) international reserves; (5) “other investment” (includes loans, deposits, banking capital, trade credits, and official government flows).
- Private capital flows proxied by excluding flows to general government and monetary authorities within “other investment”; “bank flows” used to describe private banking-sector-dominated other investment.
- Quarterly data available for 58 economies; semiannual presentation used from 2008H1 onward in some charts.

### Key statistical and descriptive findings
- Gross capital flows have grown substantially:
  - For advanced economies, gross flows rose five-fold from 5 percent of GDP in the 1980s to 25 percent of GDP in the run up to the Great Recession.
  - For emerging markets, gross flows increased from 2½ percent of GDP in the 1980s to 12 percent of GDP during the same period.
- Net flows:
  - Advanced economies: net flows largely stable at less than 2 percent of GDP over the past thirty years.
  - Emerging markets: net flows rose from 2 percent of GDP in the 1980s–1990s to 4 percent of GDP before the Great Recession.
- Persistence and predictability:
  - Net flows exhibit low persistence with AR(1) regression coefficients typically below one-half.
  - Gross inflows AR(1) coefficients generally between 0.5–0.6.
- Sensitivity to global conditions:
  - For emerging markets, total net inflows are 2 percent of GDP higher when global financing conditions are easy than when they are not.
  - Periods of low global interest rates, low global risk aversion, and strong emerging-market growth often overlap, notably in the run-up to the Asian crisis (1991–96, excluding 1994 and 1995 for specific reasons) and the run-up to the global crisis (2004–07).

### Volatility (measures and patterns)
- Two volatility measures used:
  - Standard deviation of detrended private capital flows as a share of GDP.
  - Coefficient of variation (standard deviation scaled by absolute value of the mean).
- General results:
  - Capital flows across all economy groups and most flow types exhibit volatility—with standard deviations for the median country typically much higher than average levels.
  - As gross capital flows grew, their standard deviation rose everywhere; but adjusting for size, the volatility of each incremental unit of gross and net flows (relative to GDP) for the median country is broadly similar across economy groups and has declined over time for emerging markets.
  - FDI is relatively stable across groups and over time; FDI (gross or net) has lower coefficient of variation than other flow types.
  - There is little significant difference in volatility between portfolio and bank-related flows after controlling for size.
- Representative tabulated medians (1980–2011) for the median country (selected entries from Tables 1A and 1B):
  - Net flows: median means — Advanced 0.71; Emerging 2.24; Other Developing 2.31.
  - Net flows: median standard deviations — Advanced 3.25; Emerging 4.05; Other Developing 3.81.
  - Gross inflows: median means — Advanced 7.37; Emerging 3.80; Other Developing 3.40.
  - Gross inflows: median standard deviations — Advanced 7.91; Emerging 4.10; Other Developing 3.65.
  - Gross outflows: median means — Advanced -6.44; Emerging -1.71; Other Developing -0.99.
  - Gross outflows: median standard deviations — Advanced 7.10; Emerging 2.20; Other Developing 2.06.
- Rolling-window evidence:
  - Standard deviations of gross inflows/outflows rose over time with volume; coefficients of variation for inflows to emerging markets are similar now to those for advanced economies.

### Substitutability and comovement across flows
- Advanced economies:
  - Strong negative correlations between net flows in each instrument and the remainder of the financial account—indicative of substitutability across instruments.
  - Greater complementarity of gross inflows and outflows; higher comovement between inflows and outflows (median correlation of total private capital flows inflows vs outflows = 0.90 *).
- Emerging and other developing economies:
  - Substitutability across components of net capital flows largely absent; net flows move more in tandem with gross inflows.
  - Positive comovement between inflows and outflows exists but with smaller median correlations (total private capital flows inflows vs outflows: Emerging 0.35 *; Other Developing 0.26 *).
- Specific median correlations (Table 2 and Table 3 highlights):
  - Advanced: FDI & Portfolio Equity (net) median correlation -0.36 *; Portfolio Debt & Other Investment (net) -0.40 *.
  - Advanced: inflows vs outflows median correlations — Total Private Capital Flows 0.90 *; FDI 0.64 *; Other Investment 0.69 *.
  - Emerging: inflows vs outflows median correlations — Total Private Capital Flows 0.35 *; FDI 0.30 *; Other Investment 0.18 *.

### Persistence (AR(1)) and instrument differences
- Median AR(1) persistence estimates (1980–2011, Table 4):
  - Net total private flows: Advanced 0.43; Emerging 0.48; Other Developing 0.44.
  - Gross inflows: Advanced 0.62; Emerging 0.54; Other Developing 0.52 *.
  - Gross outflows: Advanced 0.58; Emerging 0.36 *; Other Developing 0.18 *.
- Instrumental patterns:
  - FDI generally more persistent (especially in emerging and other developing economies) than portfolio equity or portfolio debt.
  - Persistence of FDI in emerging markets has fallen over time, with some reversal since the decades ending in the mid-2000s (possible link to rising share of financial FDI).

### Cyclicality with domestic GDP growth
- Correlations with domestic real GDP growth (median country, Table 5):
  - Net flows: Advanced -0.04; Emerging 0.25 *; Other Developing 0.08.
  - Gross inflows: Advanced 0.26; Emerging 0.32; Other Developing 0.12 *.
  - Gross outflows: Advanced -0.26; Emerging -0.12 *; Other Developing -0.08 *.
- Interpretation:
  - Emerging market net flows are mildly procyclical with domestic GDP growth; advanced economies show no evidence of procyclicality in total net private flows.
  - For advanced economies, gross inflows and outflows both rise during good times, offsetting effects on net flows.

### Capital flows under alternative global conditions (push/pull scenarios)
- Definitions:
  - Low global interest rates: global real interest rate below its 1980–2011 median (weighted average ECB/Bundesbank prior to 1999, and U.S. real federal funds rate).
  - Low global risk aversion: VIX level below its 1980–2011 median.
  - High emerging-minus-advanced growth differential: growth differential above its 1980–2011 median.
- Historical overlaps:
  - Most periods of low global interest rates overlapped with large growth differentials but not always with low global risk aversion.
  - Two extended episodes when all three conditions coincided: run-up to the Asian crisis (1991–96, excluding 1994 and 1995 for specific reasons) and run-up to the global crisis (2004–07).
- Effects on emerging markets:
  - Total net capital flows during events larger than the year before or after; largest when all three conditions coincide.
  - Net flows increased most around periods of low risk aversion: increased by 2¼ percentage points of GDP from the year preceding the period and fell by 1¼ percentage points afterward (Figure 11 caption descriptive magnitudes).
  - Net flows to emerging markets are more than 2 percentage points of GDP higher when global interest rates and risk aversion are low than when either or both are high (Figure 12 summary).
  - Bank flows drive much of the rise and fall in these episodes; bank flows are strongly correlated with changes in global risk aversion.
  - Gross outflows rise but are too small to offset gross inflows—net flows largely driven by foreign investors.
- Effects on advanced economies:
  - Net flows are lowest (relative to before/after) when global risk aversion is low in some scenarios; advanced economies attract more net flows when risk appetite is low.
  - Gross inflows and gross outflows both increase when risk aversion is low, implying domestic residents’ investment abroad rises alongside foreign investment inwards; net flows thus more stable.
  - Portfolio debt and bank flows are important drivers of dynamics for advanced economies under alternative scenarios.

### Conclusions and policy implications
- Core regularities:
  - Capital flow volatility and low persistence are pervasive across advanced, emerging market, and developing economies.
  - Increasing volatility over time is largely driven by the rising volume of gross flows; each incremental unit of flow relative to GDP is not becoming more volatile.
  - Advanced economies exhibit greater substitutability across net flow components and stronger complementarity between inflows and outflows, partly explaining similar total net-flow volatility across groups.
  - FDI tends to be less volatile and more persistent than other flow types.
  - Easy global financing conditions (low interest rates and low risk aversion) are associated with temporary tides of capital flows, led by gross inflows; for emerging markets, net flows are driven mainly by foreign inflows because gross outflows are too small to offset inflows.
- Policy takeaways:
  - High variability and low predictability of capital flows are a fact of life under financial globalization; policymakers across all economies need to manage and live with this volatility.
  - Macroeconomic and macroprudential tools that bolster economic and financial resilience are necessary to cope with volatile cross-border flows.
  - Greater two-way capital flow volatility may arise as emerging markets diversify residents’ investment abroad; such diversification can provide a natural hedge to manage capital flow variability.

*Source: IMF staff calculations and analysis as presented in the content unit.*

### REFERENCES

### REFERENCES

### References list
- Albuquerque, Rui, 2003, “The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment,” Journal of International Economics, Vol. 61, pp. 353–83.
- Arslanalp, Serkan, and Takahiro Tsuda, 2012, “Tackling Global Demand for Advanced Economy Sovereign Debt,” IMF Working Paper 12/284.
- Becker, Chris, and Clare Noone, 2009, “Volatility and Persistence of Capital Flows,” Reserve Bank of Australia Research Discussion Paper No. 2009–09 (Sydney: Reserve Bank of Australia). Available at http://www.rba.gov.au/publications/rdp/2009/pdr/rdp2009-09.pdf.
- Broner, Fernando, and Roberto Rigobon, 2006, “Why Are Capital Flows So Much More Volatile in Emerging than in Developed Countries?” in External Vulnerability and Preventive Policies, ed. by Ricardo Caballero, César Calderón, and Luis Céspedes (Santiago: Central Bank of Chile).
- Broner, Fernando, Tatiana Didier, Aitor Erce and Sergio Schmukler, 2013 “Gross Capital Flows: Dynamics and Crises”, Journal of Monetary Economics, No. 60, pp. 113–33.
- Calvo, Guillermo A., Eduardo Fernández-Arias, Carmen Reinhart, and Ernesto Talvi, 2001, “The Growth-Interest Rate Cycle in the United States and its Consequence for Emerging Markets,” Research Department Working Paper No, 458 (Washington: Inter-American Development Bank). Available at www.iadb.org/res/publications/pubfiles/pubWP-458.pdf.
- Claessens, Stijn, Michael Dooley, and Andrew Warner, 1995, “Portfolio Capital Flows: Hot or Cold?” World Bank Economic Review, Vol. 9, No. 1, pp. 153–74.
- Forbes, Kristin J., and Francis E. Warnock, 2012, “Capital Flow Waves: Surges, Stops, Flight, and Retrenchment” Journal of International Economics No. 88, pp. 235–51.
- Fratzscher, Marcel, 2011, “Capital Flows, Push versus Pull Factors and the Global Financial Crisis,” NBER Working Paper No. 17357.
- International Monetary Fund (IMF), 2000, “Offshore Financial Centers,” IMF Background Paper (Washington). Available at: http://www.imf.org/external/np/mae/oshore/2000/eng/back.htm.
- International Monetary Fund (IMF), 2011a, “Recent Experiences in Managing Capital Flows: Cross-Cutting Themes and Proposed Guidelines for Emerging Markets”.
- International Monetary Fund (IMF), 2011b, “International Capital Flows: Reliable or Fickle”, World Economic Outlook, April, Chapter 4, pp. 125–63.
- International Monetary Fund (IMF), 2013, “Guidance Note for the Liberalization and Management of Capital Flows.”
- Levchenko, Andrei, and Paolo Mauro, 2007, “Do Some Forms of Financial Flows Help Protect Against Sudden Stops?” World Bank Economic Review, Vol. 21, No. 3, pp. 389–411.
- Lipsey, Robert, 1999, “The Role of Foreign Direct Investment in International Capital Flows,” NBER Working Paper No. 7094.
- Lipsey, Robert, 2001, “Foreign Direct Investment in Three Financial Crises,” NBER Working Paper No. 8084.
- Milesi-Ferretti, Gian Maria, and Cédric Tille, 2011, “The Great Retrenchment: International Capital Flows during the Global Financial Crisis,” Economic Policy, Vol. 66, pp. 28–346.
- Ostry, Jonathan D., Atish R. Ghosh, Karl Habermeier, Marcos Chamon, Mahvash S. Qureshi, and Dennis B.S. Reinhardt, 2010, “Capital Inflows: The Role of Controls,” IMF Staff Position Note No. 10/04 (Washington: International Monetary Fund).
- Ostry, Jonathan D., Atish R. Ghosh, Karl Habermeier, Luc Laeven, Marcos Chamon, Mahvash S. Qureshi, and Annamaria Kokenyne, 2011, “Managing Capital Inflows: What Tools to Use?” IMF Staff Discussion Note, forthcoming (Washington: International Monetary Fund).
- Prasad, Eswar, Kenneth S. Rogoff, Shang-Jin Wei, and Ayhan Kose, 2003, “Effects of Financial Globalization on Developing Countries: Some Empirical Evidence,” IMF Occasional Paper No. 220 (Washington: International Monetary Fund).
- Sarno, Lucio, and Mark Taylor, 1999, “Hot Money, Accounting Labels and the Permanence of Capital Flows to Developing Countries: An Empirical Investigation,” Journal of Development Economics, Vol. 59, No. 2, pp. 337–64.
- Sarno, Lucio, and Mark Taylor, 1999, “Moral Hazard, Asset Price Bubbles, Capital Flows, and the East Asian Crisis: The First Tests,” Journal of International Money and Finance, Vol. 18, pp. 637–57.
- Smith, Katherine A., and Diego Valderrama, 2009, “The Composition of Capital Inflows When Emerging Market Firms Face Financing Constraints,” Journal of Development Economics, Vol. 89, No. 2, pp. 223–34.

### Appendix I. Definition of Country Groups
- The sample of countries is classified into three economy groups--advanced, emerging, and other developing economies (see Appendix Table 1):
  - Advanced economies correspond to the IMF 1990 WEO definition of industrial economies, or the member countries of the Organization of Economic Cooperation (OECD) before 1990, with the exception of Turkey.
  - For emerging economies, we follow the definition used in IMF (2011b) for the classification of emerging economies. They are the non-advanced economies used in the regional analysis in IMF’s World Economic Outlook under emerging Asia, emerging Europe, Latin America and the Caribbean, Commonwealth of Independent States (CIS), Middle-East and North Africa, and sub-Saharan Africa. However, this group excludes economies that are low-income (eligible for assistance under the IMF’s Poverty Reduction and Growth Trust) or relatively small (with nominal GDP in U.S. dollars averaged over 1990 to 2009 less than the median GDP based on all emerging and developing economies in the sample).
  - All other economies are defined as other developing economies (ODEs).
- Additional notes:
  - The above classification results in a sample of emerging economies that are largely covered by the universe of external sources, such as Morgan Stanley Capital International (MSCI), The Economist, and Dow Jones & Company.
  - Economies that are classified as advanced today but were not in 1990 are included in the sample of emerging economies. These include Cyprus, the Czech Republic, Malta, Estonia, the Slovak Republic, Slovenia, and the newly industrialized Asian economies.
  - The analyses exclude offshore financial centers as defined by the Financial Stability Forum (Table 2 in IMF, 2000). These are Antigua and Barbuda, Bahrain, Barbados, Belize, Costa Rica, Cyprus, Hong Kong SAR, Lebanon, Luxembourg, Malta, Mauritius, Panama, Seychelles, Singapore, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Switzerland, and Vanuatu.

### Appendix Table 1. Economy Groupings
- Advanced Economies:
  - Austral i a (193)
  - Austri a (122)
  - Be l gi um (124)
  - Canada (156)
  - De nmark (128)
  - Finland (172)
  - France (132)
  - Ge rmany (134)
  - Gre e ce (174)
  - Ice l and (176)
  - Ire l and (178)
  - Ital y (136)
  - Japan (158)
  - Lux e mbourg (137)
  - Ne the rl ands (138)
  - New Zealand (196)
  - Norway (142)
  - Portugal (182)
  - Spai n (184)
  - Swe de n (144)
  - Swi tze rl and (146)
  - Uni te d Ki ngdom (112)
  - Uni te d State s (111)
  - Romani a (968)
  - Slovak Republic (936)
  - Slovenia (961)
  - Turke y (186)
  - Oman (449)
  - Paki stan (564)
  - Russi a (922)
  - Saudi Arabi a (456)
  - South Af ri ca (199)
  - Syria Arab Republic (463)
  - Tuni si a (744)
  - Ukrai ne (926)
  - Uni te d Arab Emi rate s (466)
  - Swaziland (734)
  - Tanzani a (738)
  - Uganda (746)
  - V i e tnam (582)
- Emerging Asia:
  - *Chi na (924)
  - *Hong Kong SAR (532)
  - *Indi a (534)
  - *Indone si a (536)
  - *Kore a (542)
  - *Malaysia (548)
  - *Phi l i ppi ne s (566)
  - *Si ngapore (576)
  - *Sri Lanka (524)
  - *Tai wan Provi nce of Chi na (528)
  - *Thai l and (578)
  - *Pe ru (293) [listed under Emerging Asia in source layout]
- Emerging Europe:
  - *Bul gari a (918)
  - *Croati a (960)
  - *Cyprus (423)
  - *Cze ch Re publ i c (935)
  - *Estoni a (939)
  - *Hungary (944)
  - *Latvi a (941)
  - *Li thuani a (946)
  - *Mal ta (181)
  - *Pol and (964)
  - Romani a (968) [also appears in Advanced column in source layout]
  - Slovak Republic (936) [also appears in Advanced column in source layout]
  - Slovenia (961) [also appears in Advanced column in source layout]
- Emerging Latin America:
  - *Arge nti na (213)
  - *Brazi l (223)
  - *Chi l e (228)
  - *Col ombi a (233)
  - *Costa Ri ca (238)
  - *Dominican Republic (243)
  - *Ecuador (248)
  - *El Sal vador (253)
  - *Guate mal a (258)
  - *Me x i co (273)
  - *Panama (283)
  - Uruguay (298)
  - *V e ne zue l a (299)
  - *Other Emerging Economies (source lists additional Emerging Latin America items like Paraguay (288), Peru (293) etc. in mixed layout)
- Other Developing Economies:
  - *Al bani a (914)
  - *Anti gua and Barbuda (311)
  - *Bahrai n (419)
  - *Bangl ade sh (513)
  - *Barbados (316)
  - Bolivia (218)
  - *Botswana (616)
  - *Came roon (622)
  - *Cape V e rde (624)
  - *Côte d'Ivoi re (662)
  - Domi ni ca (321)
  - *Ethi opi a (644)
  - *Fi ji (819)
  - Ghana (652)
  - *Gre nada (328)
  - Haiti (263)
  - Honduras (268)
  - Jamai ca (343)
  - *Ke nya (664)
  - *Le sotho (666)
  - *Mal di ve s (556)
  - *Mauri ti us (684)
  - *Mozambi que (688)
  - Ne pal (558)
  - Nicaragua (278)
  - Nigeria (694)
  - *Papua Ne w Gui ne a (853)
  - Rwanda (714)
  - *Se yche l l e s (718)
  - Si e rra Le one (724)
  - *Sol omon Isl ands (813)
  - St. Kitts and Nevis (361)
  - St. Luci a (362)
  - St. V i nce nt and the Gre nadi ne s (364)
  - Suri name (366)
  - Swaziland (734) [also listed under Advanced column in source layout]
  - Tanzani a (738)
  - Ug anda (746)
  - V i e tnam (582)

Note: * indicates advanced and emerging market economies included in the analysis at a quarterly frequency.

*Source: _wp13183 - REFERENCES*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13183.pdf_