Capital Flows to Emerging Markets: Disentangling Quantities from Prices
IMF Working Papers, March 27, 2026
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Bibliographic details
- Authors: Andres Fernandez, Alejandro Vicondoa
- Published: March 27, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229043540.001
Publication metadata
- Title: Capital Flows to Emerging Markets: Disentangling Quantities from Prices
- Authors: Andres Fernandez, Alejandro Vicondoa
- Date: March 27, 2026
- Publication type: IMF Working Papers, Working Paper No. 2026/060, Issue: 060, Volume: 2026, Pages: 101
- DOI: https://doi.org/10.5089/9798229043540.001
- Stock No: WPIEA2026060
- ISBN: 9798229043540
- ISSN: 1018-5941
Research question and approach
- Study objective:
- Examine the joint dynamics in the volume and prices of capital flows to emerging market economies (EMEs).
- Empirical method:
- A dynamic factor model augmented with sign and zero restrictions to identify demand/supply shocks of idiosyncratic and common nature.
- Structural model:
- A calibrated structural multicountry SOE/RBC model to EMEs data, augmented with correlated productivity and interest rate shocks to assess transmission channels and match comovement and business cycle moments.
Key empirical findings
- Drivers of prices versus quantities:
- Common credit supply shocks are the main driver of prices.
- Idiosyncratic credit demand and supply shocks account for most of the variation in quantities.
- Comovement and fundamentals:
- Common credit demand drivers, captured as correlated TFP shocks, account for around half of the observed comovement in quantities.
- These correlated TFP shocks are not a significant driver of price comovement.
- Relative importance:
- Fundamentals matter significantly more for capital flows than for country spreads.
- Country spreads are driven by a sizeable global financial cycle.
Model performance and calibration insights
- Calibration targets:
- The multicountry SOE/RBC model is calibrated to EMEs data.
- Augmentations and outcomes:
- Augmented with correlated productivity and interest rate shocks, the model matches:
- The comovement between prices and quantities.
- Business cycle moments observed in the data.
Subject areas and keywords (as listed)
- Subject: Balance of payments, Capital flows, Capital inflows, Credit, Economic theory, Emerging and frontier financial markets, Financial markets, Money, Supply shocks
- Keywords: Africa, capital flow, capital flows, Capital inflows, Credit, credit demand, credit supply, Emerging and frontier financial markets, EMES data, external factors., flows to EME, fows to emerging market economies, Global, share of variance, small open economy, sovereign spread, Supply shocks
Source: Andres Fernandez and Alejandro Vicondoa, IMF Working Paper No. 2026/060, March 27, 2026 — https://www.imf.org/en/publications/wp/issues/2026/03/27/capital-flows-to-emerging-markets-disentangling-quantities-from-prices-575061
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