Capital Flows are Fickle: Anytime, Anywhere

John Bluedorn, Rupa Duttagupta, Jaime Guajardo and Petia Topalova

No 2013/183, IMF Working Papers from International Monetary Fund

Abstract: Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt.

Keywords: WP; economy; capital flow; emerging market; capital; net capital; international capital flows; volatility; persistence; comovement; global factors; advanced economy; economy group; portfolio debt; growth performance; FDI inflow; net capital flow; Capital flows; Emerging and frontier financial markets; Foreign direct investment; Private capital flows; Capital inflows; Global (search for similar items in EconPapers)
Pages: 37
Date: 2013-08-22
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Citations: View citations in EconPapers (100)

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