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Bilateral Capital Flows: Gravity, Push, and Pull

Rogelio Mercado

Working Papers from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: Using bilateral capital flows data from 10 advanced reporting economies—with over 186 bilateral country pairs—for 2000 to 2016, this paper provides strong evidence on the significance of gravity factors, including distance and bilateral trade ties, in explaining cross-border financial asset flows. This finding is new to the capital flows literature that consider push and pull factors. In addition, this study offers new evidence of regional contagion as bilateral capital flows decrease more for country pairs with closer geographic proximity (or with less information frictions) than those that are farther apart when global risk aversion rises. These findings have policy implications on the importance of information frictions, bilateral trade ties, and regional cooperation on bilateral financial asset flows.

Keywords: Bilateral Capital Flows; Gravity Factors; Global and Domestic Factors (search for similar items in EconPapers)
JEL-codes: F21 F36 G10 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-08
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https://www.seacen.org/publications/RePEc/702001-100444-PDF.pdf (application/pdf)

Related works:
Chapter: Bilateral capital flows: gravity, push, and pull (2020) Downloads
Working Paper: Bilateral Capital Flows: Gravity, Push, and Pull (2018) Downloads
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