Do different streams of capital flows affect asset prices differently?

Nur Ain Shahrier, Zaheer Anwer and M. Kabir Hassan

Global Finance Journal, 2023, vol. 57, issue C

Abstract: This paper explores the impact of six types of gross capital flows (debt, equity, and banking gross inflows and outflows) on two dimensions: (1) extreme episodes of surges, stops, flights, and retrenchments, and (2) the probability of boom-busts in ASEAN-4 asset markets for the period 1993–2018. To this end, we first decompose gross capital inflows and outflows from Balance of Payments 5 and 6 and show that ASEAN-4 is largely dominated by portfolio flows and a relatively small magnitude of banking flows. However, when we link this decomposition to the extreme episodes, our findings show banking flows are volatile enough to cause greater occurrences of flight and retrenchment episodes while volatile debt flows tend to lead to surge and stop episodes. In the second part, we construct asset price index for ASEAN-4 that can detect boom-busts periods with a minimal noise-to-signal ratio eight quarters ahead. We use heteroscedasticity panel probit and ordinal generalized linear models to show that fundamental variables and banking inflows are statistically significant at increasing likelihood of boom-busts in asset markets. These two findings highlight that although largest percentage of capital flows come through debt and equity markets, the banking channel is of paramount importance in causing extreme episodes of flight and retrenchment as well as boom-busts of asset markets.

Keywords: Capital flows; Asset boom-busts; Banking flows; Portfolio flows; Surge, stop, flight, retrenchment; Probit model (search for similar items in EconPapers)
JEL-codes: E6 F3 F5 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S104402832300056X
Full text for ScienceDirect subscribers only

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:eee:glofin:v:57:y:2023:i:c:s104402832300056x

DOI: 10.1016/j.gfj.2023.100861

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().