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Capital Flow Waves—or Ripples? Extreme Capital Flow Movements Since the Crisis

Kristin Forbes () and Francis E. Warnock

No 26851, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Has the occurrence of “extreme capital flow movements”—episodes of sudden surges, stops, flight and retrenchment—changed since the Global Financial Crisis (GFC)? This paper addresses this question by updating and building on the dataset and methodology introduced in Forbes and Warnock (2012) to calculate the occurrence of sharp capital flow movements by foreigners and domestics into and out of individual countries. The results suggest that the occurrence of these extreme capital flow movements has not increased since the GFC. The drivers of these episodes, however, appear to have changed since the GFC. Extreme capital flow movements are less correlated with changes in global risk, and are more difficult to explain with basic global, regional and domestic variables. What used to be large global “waves” in international capital flows have more recently become idiosyncratic “ripples”.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-int, nep-mon, nep-opm and nep-ore
Note: IFM
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