Economics at your fingertips  

Ride the Wild Surf: An investigation of the drivers of surges in capital inflows

César Calderón and Megumi Kubota ()

Journal of International Money and Finance, 2019, vol. 92, issue C, 112-136

Abstract: Industrial countries and emerging markets economies (EMEs) have experienced a wild ride on gross capital inflows over the past 15 years. After reaching a record high in the run-up to the global financial crisis, they collapsed dramatically in 2008–9. As the world economy started to recover, global capital flows resumed at different speeds. Capital flows into EMEs recovered faster than those flows in industrial economies. This paper aims at understanding the drivers of these surges in gross inflows using quarterly data for 79 countries from 1975 to 2014. We find that domestic and external drivers have a significant explanatory power in driving surges of inflows. Domestic factors appear to play a significantly larger role in explaining surges into EMEs. Zooming in our findings shows that: (a) overvalued currencies rather than credit growth tend to attract massive capital inflows, (b) surges to either industrial countries or EMEs are driven by regional contagion, (c) strong growth and natural resource abundance are key to attract inflows of foreign capital into EMEs, (d) lower policy uncertainty about the global economy tend to trigger surge episodes, and (e) an increase in global risk aversion would precede the end of surges.

Keywords: Gross capital flows; Surges (search for similar items in EconPapers)
JEL-codes: E32 E51 F21 F32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Ride the wild surf: an investigation of the drivers of surges in capital inflows (2014) Downloads
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:

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 Dana Niculescu ().

Page updated 2019-11-11
Handle: RePEc:eee:jimfin:v:92:y:2019:i:c:p:112-136