Coincident Indicators of Capital Flows

Malika Pant and Yanliang Miao

No 2012/055, IMF Working Papers from International Monetary Fund

Abstract: Capital flows data from Balance of Payments statistics often lag 3-6 months, which renders timely surveillance and policy deliberation difficult. To address the tension, we propose two coincident composite indicators for capital flows that improve upon existing proxies. We find that the most widely used proxy, the capital tracker, often overpredicts net flows by 30 percent. We augment the tracker into a composite indicator by assigning to it a lesser but optimally estimated weight while incorporating other regional and global coincident correlates of capital flows. The proposed composite indicator of net flows outperforms the capital tracker in its original format. To complement the indicator with an even timelier variant, we also utilize the EPFR high frequency coverage of gross bond and equity flows as an indicator on foreign investors' sentiment.

Keywords: WP; border; net capital; Other EMs; capital; Capital Flows; Coincident Indicators; Capital Tracker; bond flow; EPFR flow; MSCI index; merchandise trade balance; EPFR data; Latin America EMs; Stocks; Bonds; Trade balance; Cyclical indicators; Global; Europe; Asia and Pacific (search for similar items in EconPapers)
Pages: 24
Date: 2012-02-01
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Citations: View citations in EconPapers (43)

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