What Types of Capital Flows Help Improve International Risk Sharing?

Ayhan Kose and Ergys Islamaj

No 16749, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Cross-border capital flows are expected to lead to increased international risk sharing by facilitating borrowing and lending in global financial markets. This paper examines risk-sharing outcomes of various types of capital flows (foreign direct investment, portfolio equity, debt, remittance, and aid flows) in a large sample of emerging market and developing economies. The results suggest that remittances and aid flows are associated with increased international risk sharing. Other types of capital flows are not consistently correlated with better risk-sharing outcomes. These findings are robust to the use of different econometric specifications, country-specific characteristics, and other controls.

Keywords: Capital flows; Remittances; Aid flows; international risk sharing (search for similar items in EconPapers)
JEL-codes: E1 F02 F4 G01 (search for similar items in EconPapers)
Date: 2021-11
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Related works:
Journal Article: What types of capital flows help improve international risk sharing? (2022)
Working Paper: What types of capital flows help improve international risk sharing? (2021)
Working Paper: What Types of Capital Flows Help Improve International Risk Sharing? (2021)
Working Paper: What Types of Capital Flows Help Improve International Risk Sharing ? (2021)
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