Uncertainty and episodes of extreme capital flows in the Euro Area

Torsten Schmidt and Lina Zwick

Economic Modelling, 2015, vol. 48, issue C, 343-356

Abstract: During the Euro Area crisis contractions in international capital flows occurred along with a high level of economic uncertainty. While both factors are able to trigger or amplify economic shocks posing a threat for economic activity, it is a natural question whether they are related. The aim of this paper is to analyse the link between different measures of uncertainty and episodes of extreme capital flows for the EMU-12 countries using gross capital flows. We find that country-specific risk factors seem to play an important role in indicating periods of extreme capital flows. Moreover, country-specific uncertainty seems to be more relevant for foreign direct investors and for those in stressed countries of the Euro Area.

Keywords: Capital flows; Uncertainty; Euro Area crisis; Sudden stops; Retrenchment (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (25)

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Related works:
Working Paper: Uncertainty and Episodes of Extreme Capital Flows in the Euro Area (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:48:y:2015:i:c:p:343-356

DOI: 10.1016/j.econmod.2014.10.047

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