Domestic Factors and Episodes of Gross Capital Inflows

Rogelio Mercado

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper extends the literature on gross capital flows by looking into domestic factors that covary significantly with cross-country differences in the transitional likelihoods of moving between episodes of capital inflows. Applying a state-transition framework, we view states of gross capital inflows as normal , surge , and stop , following Forbes and Warnock (2012a and 2012b) approach in identifying extreme episodes for a sample of 55 advanced and emerging economies from 1980Q1 to 2014Q4. The empirical findings show that cross-country differences in transitional likelihoods are strongly associated with state-dependence variables such as duration and occurrence. There is evidence to suggest the presence of negative duration dependence on the transitional likelihood of moving between episodes such that the longer an economy spends in a given episode, the less likely it will exit that episode. However, duration and occurrence of episodes of gross capital inflows are also significantly correlated with domestic factors such as output volatility, de facto and de jure financial openness, and foreign reserves.

Keywords: capital flows; surges; stops; capital flows transitions (search for similar items in EconPapers)
JEL-codes: F30 F32 F36 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2016-12
New Economics Papers: this item is included in nep-mon
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Downloads: (external link)
http://www.tcd.ie/Economics/TEP/2016/TEP1916.pdf

Related works:
Journal Article: Capital flow transitions: Domestic factors and episodes of gross capital inflows (2019)
Working Paper: Domestic Factors and Episodes of Gross Capital Inflows (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1916

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