Capital flows at risk: Taming the ebbs and flows

R. Gaston Gelos (), Lucyna Gornicka, Robin Koepke, Ratna Sahay and Silvia Sgherri

Journal of International Economics, 2022, vol. 134, issue C

Abstract: We propose a new quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on changes in global financial conditions, domestic structural characteristics, and policies. The approach allows us to differentiate between the impact on the median versus the tails of the future predicted density of flows, and between short- and medium-term effects. We find that FX- and macroprudential interventions are effective in mitigating downside risks to portfolio flows stemming from adverse global shocks, while tightening of capital controls in response appears to be counterproductive. Good institutional frameworks are not able to shield countries from the increased volatility of portfolio flows in the immediate aftermath of global shocks, but can contribute to a more rapid bounce-back of foreign flows over the medium term. Our results highlight the limitations of the standard approach, which focuses only on the short-term behavior of average flows.

Keywords: Capital flows; Macroprudential policies; Foreign-exchange intervention; Capital controls; Emerging markets (search for similar items in EconPapers)
JEL-codes: E52 F32 F38 G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199621001355
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Capital Flows at Risk: Taming the Ebbs and Flows (2021)
Working Paper: Capital Flows at Risk: Taming the Ebbs and Flows (2019)
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:eee:inecon:v:134:y:2022:i:c:s0022199621001355

DOI: 10.1016/j.jinteco.2021.103555

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().