Risk-On/Risk-Off, Capital Flows, Leverage, and Safe Assets

Robert McCauley

No 405, ADBI Working Papers from Asian Development Bank Institute

Abstract: This paper describes the international flow of funds associated with calm and volatile global equity markets. During calm periods, portfolio investment by real money and leveraged investors in advanced countries flows into emerging markets, leading to an asymmetric asset swap (risky emerging market assets against safe reserve currency assets) and leveraging up by emerging market central banks. In declining and volatile global equity markets, these flows reverse, and, contrary to some claims, emerging market central banks draw down reserves substantially. In effect emerging market central banks then release safe assets from their reserves, supplying safe havens to global investors.

Keywords: capital flows; safe assets; international flow funds; vix; global liquidity (search for similar items in EconPapers)
JEL-codes: E58 F30 G15 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-01-27
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.adbi.org/files/2013.01.25.wp405.risk.on.risk.off.capital.flows.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.adbi.org/files/2013.01.25.wp405.risk.on.risk.off.capital.flows.pdf [302 Moved Temporarily]--> https://www.adbi.org/files/2013.01.25.wp405.risk.on.risk.off.capital.flows.pdf [302 Moved Temporarily]--> https://www.adb.org/adbi/files/2013.01.25.wp405.risk.on.risk.off.capital.flows.pdf)

Related works:
Journal Article: Risk-On/Risk-Off, Capital Flows, Leverage and Safe Assets (2013)
Working Paper: Risk-On/Risk-Off, Capital Flows, Leverage, and Safe Assets (2013)
Working Paper: Risk-On/Risk-Off, Capital Flows, Leverage, and Safe Assets (2013)
Journal Article: Risk-on/risk-off, capital flows, leverage and safe assets (2012)
Working Paper: Risk-on/risk-off, capital flows, leverage and safe assets (2012)
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:ris:adbiwp:0405

Access Statistics for this paper

More papers in ADBI Working Papers from Asian Development Bank Institute Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by ADB Institute ().