Gross capital flows: Dynamics and crises

Broner, Fernando; Didier, Tatiana; Erce, Aitor; Schmukler, Sergio L.

doi:10.1016/j.jmoneco.2012.12.004

Cited by 500 publications

(228 citation statements)

References 45 publications

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“…The nonlinear pattern shown here may suggest that extremely high growth of a particular emerging market country may build up vulnerability to external risk. Using country-panel regressions, Broner et al (2013) find evidence of retrenchment in capital inflows during the 3 years following a country-specific shock in lower-and upper-middle-income countries. Our finding here suggests that retrenchment in capital inflows after a US interest rate hike depends on the magnitude of inflows before the shock.…”

Section: A Do Emerging Market Economy Responses Depend On Their Econmentioning

confidence: 97%

“…Tightening domestic policy tends to impact capital flows less than tightening US policy, and is significant only for bond inflows, suggesting that adjusting policy rates in EMEs to handle capital flows could have limited effect. 6 Broner et al (2013) examine the impact of banking, currency, and debt crises on capital flow components. They find declines in capital inflows during crises across all the components for upper-middle-income and lower-middle-income countries.…”

Section: B Effects On Components Of Capital Flowsmentioning

confidence: 99%

“…Capital flows into EMEs are an important transmission channel of global liquidity, as examined by Morgan (2011);Rey (2015); Broner et al (2013) ;Cerutti, Claessens, and Ratnovski (2014) ;Alberola, Erce, and Serena (2016); Kim and Shin (2016) ;Chari, Dilts-Stedman, and Lundblad (2017);and Cerutti, Claessens, and Rose (2017). We analyze four components of capital inflows: bond investments, equity investments, foreign direct investments, and other investments.…”

Section: Introductionmentioning

confidence: 99%

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Divergent Emerging Market Economy Responses to Global and Domestic Monetary Policy Shocks

Choi¹,

Kang²,

Kim³

et al. 2017

ADB Economics Working Paper Series

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Section: A Do Emerging Market Economy Responses Depend On Their Econmentioning

confidence: 97%

Section: B Effects On Components Of Capital Flowsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Divergent Emerging Market Economy Responses to Global and Domestic Monetary Policy Shocks

Choi¹,

Kang²,

Kim³

et al. 2017

ADB Economics Working Paper Series

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“…According to this literature, the gross ‡ows composing a country´s net capital in ‡ow react dissimilarly to di¤erent factors. Along these lines, Forbes and Warnock (2012) and Broner et al (2013) show that resident and foreign investors' reaction functions are distinct. 2 These papers demonstrate that gross capital ‡ows are very large and volatile, especially relative to net capital ‡ows.…”

Section: Introductionmentioning

confidence: 96%

“…We distinguish varieties of capital ‡ows entering and exiting an economy and study how they react to the signing of an IMF program. We follow Broner et al (2013) and separate ‡ows according to the investors' residence. Additionally, as in Janus and Riera-Crichton (2015), we study the e¤ect of o¢ cial funding on a breakdown of capital ‡ows into and out of an economy, regardless of the nationality of investors.…”

Section: Introductionmentioning

confidence: 99%

Catalytic IMF? A Gross Flows Approach

Erce¹,

Riera‐Crichton

2015

gwp

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The financial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic effect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital inflow to study instead the IMF's catalytic role in the context of gross capital flows. Using fixed-effects regressions, instrumental variables and local projection methods, we find significant differences in how resident and foreign investors react to IMF programs as well as in inward and outward flows. While IMF lending does not catalyze foreign capital, it does affect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' flows drive this effect, we conclude that IMF catalysis is "a banking story". In comparing the effects across crisis types, we find that the effect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least effect on foreign investors during bank crises. AbstractThe …nancial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic e¤ect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital in ‡ow to study instead the IMF's catalytic role in the context of gross capital ‡ows. Using …xed-e¤ects regressions, instrumental variables and local projection methods, we …nd signi…cant di¤erences in how resident and foreign investors react to IMF programs as well as in inward and outward ‡ows. While IMF lending does not catalyze foreign capital, it does a¤ect the behavior of resident investors, who are both less likely to place their savings abroad and more likely to repatriate their foreign assets. As domestic banks' ‡ows drive this e¤ect, we conclude that IMF catalysis is "a banking story". In comparing the e¤ects across crisis types, we …nd that the e¤ect of the IMF on resident investors is strongest during sovereign defaults, and that it exerts the least e¤ect on foreign investors during bank crises.

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Globalization of Capital and National Policymaking

Hall

2015

Emerging Trends in the Social and Behavioral Sciences

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Through a combination of economic, political, and technological changes, capital has become increasingly mobile across borders. This globalization of capital markets has created constraints on national policymaking. Fearing the loss capital inflows and the destabilizing effects of capital outflows, governments have incentives to avoid enacting policies that investors dislike. Applied across countries, this creates pressure for governments to compete for capital inflows by progressively reducing regulatory and tax burdens. Ultimately, this could lead to a race to the bottom that ends in complete deregulation. Yet, scholarship shows that while this pressure on governments exists, there has not been complete convergence of policy across countries. Instead, there remains persistent divergence as states do maintain some autonomy across a number of policy choices. This essay explores how recent research explains this interaction between the globalization of capital and national policymaking autonomies. Financial crises in the United States and Europe have challenged our understanding of how systemic risk can and should be managed in a world of mobile capital. Moving forward, scholars must build on the lessons from these crises.

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Gross capital flows: Dynamics and crises

Cited by 500 publications

References 45 publications

Divergent Emerging Market Economy Responses to Global and Domestic Monetary Policy Shocks

Divergent Emerging Market Economy Responses to Global and Domestic Monetary Policy Shocks

Catalytic IMF? A Gross Flows Approach

Globalization of Capital and National Policymaking

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