Extreme capital flow episodes from the Global Financial Crisis to COVID-19: An exploration with monthly data

Annamaria de Crescenzio and Etienne Lepers

No 2021/05, OECD Working Papers on International Investment from OECD Publishing

Abstract: The COVID-19 pandemic triggered a sudden funding squeeze manifested in major disruptions in international capital flows, the most dramatic of the wave of extreme capital flow episodes since the global financial crisis (GFC). This paper contributes to efforts to better understand this extreme episode in the context of post-GFC structural financial changes. To do so, it presents a new monthly dataset of gross capital flows for 41 countries, better suited to the identification of sudden shocks than quarterly Balance of Payments data. Leveraging on this dataset, the paper first develops a more precise identification of extreme capital flow episodes since the GFC and revisit their drivers, asking whether COVID-19 episode significantly changed recent findings of the weaker role of global factors. The answer is no. Rather, the role of global factors may have further lost explanatory power in the post-GFC period including COVID. On the other hand, pull factors such as pre-COVID vulnerabilities and country-specific and pandemic-specific factors appear key to explaining the identified cross-country heterogeneity.

JEL-codes: F32 F34 F38 (search for similar items in EconPapers)
Date: 2021-07-26
New Economics Papers: this item is included in nep-fdg, nep-mon and nep-opm
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Citations: View citations in EconPapers (7)

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