US Long-Term Interest Rates and Capital Flows to Emerging Economies

Eduardo Olaberria

Journal of International Commerce, Economics and Policy (JICEP), 2015, vol. 06, issue 02, 1-32

Abstract: This paper studies the association between United States (US) long-term interest rates and cycles of capital flows to emerging market economies (EMEs). It finds that cycles in capital flows to EMEs are linked to global conditions, including interest rates in the US. In particular, higher US long-term interest rates are associated with lower levels of gross capital flows to EMEs, and to a higher probability of observing sharp reversals in those flows. Episodes of sharp reversals of net capital flows, on the other hand, are mostly associated with domestic macroeconomic conditions and not necessarily with global factors such as US interest rates.

Keywords: Interest rates; capital inflows; asset prices; sudden-stops; exchange rate regimes; E32; F32; F41; G10; G12; G15 (search for similar items in EconPapers)
Date: 2015
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Working Paper: US Long Term Interest Rates and Capital Flows to Emerging Economies (2014)
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DOI: 10.1142/S1793993315500088

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