The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis

IMF Working Papers, March 10, 2017

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The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis

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Bibliographic details

• Authors: Swarnali A Hannan
• Published: March 10, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475586121.001

Research design and data

• Sample: 34 emerging markets and developing economies.
• Period covered: 2009Q3-2015Q4.
• Methodology: panel framework studying determinants of capital flows (both net and gross) across a wide range of instruments.
• Empirical extension: baseline regressions are extended to focus on high and low episodes—quarters with flows one standard deviation above/below mean.

Key findings on drivers of capital flows

• Overall drivers:
  • The capital flow slowdown witnessed in recent years is due to a combination of lower growth prospects of recipient countries and worse global risk sentiment.
• Heterogeneity by instrument and flow type:
  • Determinants of flows can be considerably different across instruments and across the type of flows considered (net or gross).
  • The sensitivity of certain types of flows toward push and pull factors increases during periods of high and low capital flows.
  • Some variables may not be significant during normal times but can be important drivers during high or low episodes, and vice versa.
• Role of specific indicators during episodes:
  • Indicators like the gap between the U.S. long- and short-term maturity bond yields (U.S. yield gap) — not significant during normal times — can be an important driver during high episodes.

Subject coverage and keywords (as listed)

• Subjects: Balance of payments, Capital account, Capital flows, Commodity prices, Financial crises, Foreign direct investment, Global financial crisis of 2008-2009, Prices.
• Keywords: Capital account, capital flow, capital flows, capital outflow, Commodity prices, debt flow, differential vis-à-vis, emerging market economies, equity flow, FDI flow, FDI inflow, Foreign direct investment, Global, Global financial crisis of 2008-2009, interest rate differential, U.S. yield gap, WP.

Publication and document metadata

• Author: Swarnali A Hannan.
• Publication date: March 10, 2017.
• Series: Working Paper No. 2017/052.
• Volume: 2017.
• Issue: 052.
• Pages: 26.
• Stock No: WPIEA2017052.
• DOI: https://doi.org/10.5089/9781475586121.001
• ISBN: 9781475586121
• ISSN: 1018-5941

IMF Working Paper No. 2017/052 — Swarnali A Hannan (March 10, 2017).

Content in this bundle

• The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis, WP/17/49, March 2017
  • The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis, WP/17/49, March 2017 (Markdown version)
  • The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis, WP/17/49, March 2017 (PDF)