Estimating the determinants of capital flows to emerging market economies: a maximum likelihood disequilibrium approach

Guillermo Felices and Bjorn-Erik Orskaug
Additional contact information
Guillermo Felices: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Bjorn-Erik Orskaug: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 354, Bank of England working papers from Bank of England

Abstract: This paper studies the determinants of capital flows defined as gross external bond and syndicated loan issuance to a group of emerging market economies (EMEs) since 1992. We follow the previous literature by estimating an explicit disequilibrium demand and supply model of capital flows using maximum likelihood techniques. We use the estimated supply and demand determinants to calculate time-varying probabilities of international supply-side rationing, estimating the model for the asset class as a whole. We then explore applications to individual EMEs including Brazil, Chile, China, Colombia, Korea, Mexico, Poland and Thailand using a longer time period than in previous work. For our selection of EMEs taken together, the main determinants of the supply of capital from the rest of the world are credit ratings, EME spreads, world growth and US high-yield spreads. On the demand side, the EME equity index has a positive effect on capital flows, while EME spreads and commodity prices have a negative one. The applications to individual countries show similar signs. Finally, we calculate the probability of capital crunch for EMEs in aggregate and for some countries individually.

Keywords: Capital flows; disequilibrium; emerging markets; rationing. (search for similar items in EconPapers)
JEL-codes: F32 F34 O19 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-11-24
New Economics Papers: this item is included in nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... arket-economies-.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:boe:boeewp:0354

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().