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Surges

Atish Ghosh (), Mahvash Qureshi, Jun Il Kim and Juan Zalduendo

Journal of International Economics, 2014, vol. 92, issue 2, 266-285

Abstract: This paper examines when and why capital sometimes surges to emerging market economies (EMEs). Using data on net capital flows for 56 EMEs over 1980−2011, we find that global factors, including US interest rates and investor risk aversion act as “gatekeepers” that determine when surges of capital to EMEs will occur. Whether a particular EME receives a surge, and the magnitude of that surge, however, depends largely on domestic factors such as its external financing need, capital account openness, and exchange rate regime. Differentiating between surges driven by exceptional behavior of asset flows (repatriation of foreign assets by domestic residents) from those driven by exceptional behavior of liability flows (nonresident investments into the country), shows the latter to be relatively more sensitive to global factors and contagion.

Keywords: Surges; Capital flows; Emerging market economies (search for similar items in EconPapers)
JEL-codes: F21 F32 (search for similar items in EconPapers)
Date: 2014
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