The cyclical properties of disaggregated capital flows

Silvio Contessi, Pierangelo DePace and Johanna Francis
Authors registered in the RePEc Author Service: Pierangelo De Pace

No 2008-041, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We describe the second-moment properties of the components of international capital flows and their relationship (covariance and correlation) to business cycle variables of 22 emerging and OECD countries. Disaggregated flows have different volatility properties, with debt being the most volatile and FDI the least volatile. We show that (a) inward flows are procyclical, outward and net outward flows are countercyclical for most industrial and emerging countries while, for the G-7, both inward and outward flows are procyclical and net outflows are countercyclical; (b) inward FDI flows are procyclical in industrial countries, countercyclical in emerging countries; and (c) there is no clear pattern for other equity flows and debt. Using formal statistical tests, we document changes in variability, covariance, and correlation of capital flows with a set of macroeconomic variables for G-7 countries. We find mixed evidence of changes over capital account liberalization episodes and breaks in international business cycles, and a clear increase in variance for all types and signs of flows. We estimate breaks at unknown dates in the conditional variance of each capital flow to find that they differ considerably from the breaks associated with capital account liberalization and financial globalization.

Keywords: Capital movements; Business cycles (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-mac and nep-opm
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: The cyclical properties of disaggregated capital flows (2013)
Working Paper: The Cyclical Properties of Disaggregated Capital Flows (2009)
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