Benchmarking Portfolio Flows

John Burger, Francis E. Warnock and Veronica Warnock

No 24761, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: To gauge the amount of portfolio inflows a country can expect to receive, we create a benchmark, a longer-term baseline path around which actual flows fluctuate. The relationship between our benchmark and actual flows is quite strong for emerging market economies (EMEs). For our sample of 28 EMEs, there is a significant long-run relationship between actual portfolio flows and our benchmark, flows adjust strongly toward the benchmark, and our benchmark helps predict one-year-ahead changes in inflows. For advanced economies (AEs), results are less impressive, but again the benchmark performs well in directional forecasting exercises. In practical terms, it is informative to distinguish between movements toward the benchmark as opposed to movements away from the benchmark. An example: While portfolio inflows to both Asian EMEs and Latin America plummeted in 2015, our benchmark analysis correctly predicted that inflows should rebound in Asia (because flows had fallen far below the benchmark) but stay near the new, low level in Latin America (where the sharp decline in inflows was back to benchmark levels). We provide similar analysis for 45 countries, both advanced and emerging, for the 2000 to 2017 period.

JEL-codes: F21 F3 G11 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-sea
Note: IFM
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Citations: View citations in EconPapers (8)

Published as John D. Burger & Francis E. Warnock & Veronica Cacdac Warnock, 2018. "Benchmarking Portfolio Flows," IMF Economic Review, vol 66(3), pages 527-563.

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