The Macroeconomic Effects of Portfolio Equity Inflows

Nick Sander

Staff Working Papers from Bank of Canada

Abstract: I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios. For countries with fixed exchange rates, GDP rises for at least two years following an exogenous inflow with a peak effect of 0.8 percent after 18 months. This is driven by rises in investment and exports, where the latter response is inconsistent with standard expenditure switching channel mechanisms. Non-fixing countries maintain GDP roughly at the same pre-shock levels but achieve this with higher interest rates.

Keywords: Business fluctuations and cycles; International financial markets; International topics; Monetary policy (search for similar items in EconPapers)
JEL-codes: E32 F32 F44 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2023-06
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-mfd and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2023/06/swp2023-31.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:23-31

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().