Non-bank Financial Intermediation and Capital Flows: Evidence from Emerging Market Economies

Horacio Aguirre and Rodrigo Pérez Ártica

No 4534, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: We look at the interplay of non-bank financial intermediation (NBFI) and capital flows in emerging market economies (EMEs). We examine whether gross capital flows to twenty-four EMEs, including seven Latin American economies, are related to foreign bond holdings of non-bank financial intermediaries, over and above local and global factors. We estimate panel data models that account for cross-country correlation, using quarterly data from the dataset by Arslanalp and Tsuda (2014) in the 2004-2021 period. We discriminate flows by sectors (total, government, corporate and banking), include time and country fixed effects, and employ several definitions of our variable of interest: as a categorical variable, capturing countries with the largest share of foreign nonbank investors, or as a direct measure of their participation. We also carry out event studies around the occurrence of the global financial crisis and the covid-19 crisis. Preliminary results suggest that: NBFI are “pipe” factors driving flows (in addition to “push” and “pull” ones), whose impact changes over time and depending on the type of flow; in some cases, foreign NBFI magnifies the impact of global factors on capital inflows, while they weaken the pull of local factors; and NBFI amplified outflows in the market turmoil of 2020.

JEL-codes: C23 E44 F32 G23 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
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