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Analysing sectoral capital flows: Covariates, co-movements, and controls

Etienne Lepers and Rogelio Mercado

No 2021/04, OECD Working Papers on International Investment from OECD Publishing

Abstract: This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies from 2000-18. This includes direct, portfolio and other investments to and from five sectors: central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs) and a corresponding dataset on capital controls imposed on these sectors. The paper uses this data to examine the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. The findings show that: 1) private sectoral flows have varying sensitivities to global financial conditions and different cyclicality with respect to output growth. For instance, unlike other flows, NFCs respond to global commodity prices but not global risk aversion and, unlike banks, OFCs cut foreign investment in periods of domestic investment; 2) co-movements of resident and non-resident OFC sectoral flows add to the observed positive correlation between gross inflows and outflows; and, 3) the tightening of capital controls on NFCs and OFCs appear effective in reducing the volume of flows to these sectors.

Keywords: capital controls; capital flows correlations; sectoral capital flows (search for similar items in EconPapers)
JEL-codes: F21 F38 F41 G20 (search for similar items in EconPapers)
Date: 2021-07-02
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn, nep-mon and nep-opm
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Working Paper: Sectoral Capital Flows: Covariates, Co-movements, and Controls (2020) Downloads
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