The dynamics of international capital flows: Results from a dynamic hierarchical factor model

Marcel Förster, Markus Jorra and Peter Tillmann

Journal of International Money and Finance, 2014, vol. 48, issue PA, 101-124

Abstract: The present paper examines the degree of comovement of gross capital inflows, which is a highly sensitive issue for policy makers. We estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into (i) a global factor common to all types of flows and all recipient countries, (ii) a factor specific to a given type of capital inflows, (iii) a regional factor and (iv) a country-specific component. We find that the latter explains by far the largest fraction of fluctuations in capital inflows followed by regional factors, which are particularly important for emerging markets' FDI and portfolio inflows as well as bank lending to Emerging Europe. The global factor, however, explains only a small share of the overall variation. We also employ dynamic panel and time series regressions to explain the determinants of the estimated components. The global factor is shown to reflect U.S. financial conditions.

Keywords: Capital flows; Dynamic hierarchical factor model; Emerging economies; Financial crises (search for similar items in EconPapers)
JEL-codes: C30 F21 F32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560614001181
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Dynamics of International Capital Flows: Results from a Dynamic Hierarchical Factor Model (2012)
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:jimfin:v:48:y:2014:i:pa:p:101-124

DOI: 10.1016/j.jimonfin.2014.07.004

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().