Volatility of Capital Flows to Emerging Economies

Katia Rocha () and Ajax Moreira ()
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Katia Rocha: IPEA
Ajax Moreira: IPEA

Brazilian Review of Finance, 2013, vol. 11, issue 3, 421-448

Abstract: The paper proposes a panel model to the determinants of capital flow volatility to a group of 18 emerging market economies (EME) in the period of 2000 to 2011. It studies the robustness of the model regarding different volatility measures; analyses several types of gross capital inflow; focusing the role of government institutional quality and the development of domestic financial system (banks, insurance companies, and capital markets – stocks, bonds and derivatives). The EME analyzed represented roughly 95% of the Emerging Markets Bond Index Global – EMBIG in January 2013, being the biggest destination to international capital flow to EME according to the report of the Bank for International Settlements - BIS (2009). The main conclusion suggests that a reduction of capital flow volatility can be achieved by the adoption of policies that improve government institutional quality and promote development, stability and efficiency of the domestic financial system.

Keywords: Capital Flow; Emerging Markets; Institutional Quality of the Government; Development of Domestic Financial System (search for similar items in EconPapers)
JEL-codes: C23 F21 F36 G38 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:11:y:2013:i:3:p:421-448

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