The “Butterfly Effect” of Volatility in Net International Capital Flows: An Analysis of Co-Movement Characteristics and Influencing Factors

Hang Luo () and Jianwei Tan ()
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Hang Luo: Sino-Danish College, University of Chinese Academy of Sciences, Beijing 100190, China
Jianwei Tan: Academy of Mathematics and Systems Science, University of Chinese Academy of Sciences, Beijing 100190, China

Sustainability, 2024, vol. 16, issue 17, 1-18

Abstract: This paper employs social network analysis to investigate the characteristics and determinants of co-movement in the volatility of net cross-border capital flows. We have identified a significant “small-world” pattern in the co-movement network. Economies with highly positive or negative co-movement of volatility in net capital flows display regional differences. Furthermore, economies with high trade intensity, large interest-rate spreads, membership in the same economic organization, and geographical adjacency exhibit significantly increased co-movement of volatility in net private capital flows and net other investment flows. Economies with large differences in economic growth present less co-movement of volatility in net portfolio flows.

Keywords: co-movement of volatility; net international capital flows; network analysis; MRQAP method (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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