Dynamic Capital Inflow Transmission Of Monetary Policy To Emerging Markets

Adugna Olani

No 1358, Working Paper from Economics Department, Queen's University

Abstract: In this paper, I examine the effects of advanced economies' conventional monetary policy on gross foreign direct and portfolio investment inflows to emerging economies. I use structural vector autoregressions to analyse and compare the response of each inflow category to world interest rate and emerging economies' monetary and exchange rate shocks. Gross foreign direct inflows respond slowly to shocks while gross portfolio reacts on impact. Furthermore, the reaction of foreign direct investment to the shocks is not as high. These results suggest that monetary and exchange rate policies ofemerging economies influence portfolio inflows more than they impact foreign direct investment inows. These results also imply the existence of fundamental differences in capital flow categories beyond what we know to date. I address the "push" and "pull" debate in categories capital flows by quantitatively comparing the forecast error variance decomposition. I do not find evidence of "push" over "pull" factors in either class of inflows.

Keywords: Interest Rates; Monitary Policy; Capital Flows; Emerging Markets; Exchange Rate (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 F32 F37 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1358.pdf First version 2016 (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:qed:wpaper:1358

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().