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Capital inflows to emerging countries and their sensitivity to the global financial cycle

Ines Buono (), Flavia Corneli () and Enrica Di Stefano ()
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Enrica Di Stefano: Bank of Italy

No 1262, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study how the effect of global and domestic factors on capital flows towards emerging economies has changed in the last 25 years. We find that both the global financial crisis and the so-called ‘taper tantrum’ event, when investors perceived the end of the US Federal Reserve’s unconventional monetary policy, triggered changes in the sensitivity of capital inflows to their main drivers. In particular, we provide evidence that during the period between the global financial crisis and the taper tantrum, international investors devoted less attention to domestic factors. Nevertheless, the taper tantrum marked the beginning of a new phase, characterized by increased sensitivity to both global factors and domestic vulnerabilities.

Keywords: international capital movements; uncertainty; global financial cycle; VIX; non-linearities (search for similar items in EconPapers)
JEL-codes: F21 F32 F42 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
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