Capital Flows are Fickle: Anytime, Anywhere

By John C Bluedorn, Rupa Duttagupta, Jaime Guajardo, Petia Topalova

August 22, 2013

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John C Bluedorn, Rupa Duttagupta, Jaime Guajardo, and Petia Topalova. Capital Flows are Fickle: Anytime, Anywhere, (USA: International Monetary Fund, 2013) accessed September 20, 2024

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.

Subject: Balance of payments, Capital flows, Capital inflows, Emerging and frontier financial markets, Financial markets, Foreign direct investment, Private capital flows

Keywords: Advanced economy, Capital, Capital flow, Capital flows, Capital inflows, Comovement, Economy, Economy group, Emerging and frontier financial markets, Emerging market, FDI inflow, Foreign direct investment, Global, Global factors, Growth performance, International capital flows, Net capital, Net capital flow, Persistence, Portfolio debt, Private capital flows, Volatility, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/183
Stock No:

WPIEA2013183
ISBN:

9781484389041
ISSN:

1018-5941

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