How Common are Capital Flows Surges? How They are Measured Matters -a Lot

Crystallin, Masyita; Efremidze, Levan; Kim, Sung‐Soo; Nugroho, Wahyu; Sula, Ozan; Willett, Thomas D.

doi:10.1007/s11079-015-9342-3

Cited by 33 publications

(12 citation statements)

References 22 publications

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“…A caveat is that financial depth has positive and significant coefficients for both surge and stop episodes in the new measures, implying that countries with greater financial markets have higher chances of experiencing both surges and stops. As the empirical results of Crystallin et al (2015) suggest, the different measures used to identify extreme capital flows may produce widely different outcomes on the numbers of episodes. Despite such differences, we observe overall that our baseline results are analogous to those obtained from other measures of episodes, with only a few exceptions.…”

Section: The Baseline Resultsmentioning

confidence: 99%

On the Determinants of Surges and Stops in Foreign Loans: An Empirical Investigation

Baek

Song

2015

Open Econ Rev

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This paper examines the determinants of surge and stop episodes in foreign loans using quarterly data from 55 countries covering 1990Q1 to 2011Q4. The estimation results show that, first, global, contagion and domestic factors are all significantly associated with both loan-led surge and stop episodes. Second, domestic factors are more relevant to stops than to surges and are associated more strongly with episodes in emerging countries than with those in advanced countries. Third, global risk and domestic growth shock are most consistent and important in predicting both types of episodes. Fourth, financial linkage is the most important contagion channel in the occurrence of loan-led episodes. Fifth, capital control is not a useful tool for avoiding either type of episode and may actually increase their likelihood. Finally, stops in emerging countries are strongly related to macroeconomic fundamentals such as inflation, current account balance, net foreign assets, real exchange rate, and previous occurrence of surge episodes. Our results strongly suggest that emerging countries with lower institutional quality levels are more likely to experience both surges and stops.

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Section: The Baseline Resultsmentioning

confidence: 99%

On the Determinants of Surges and Stops in Foreign Loans: An Empirical Investigation

Baek

Song

2015

Open Econ Rev

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“…Common to the six methods they identify and test is their finding that surges have been increasing over time especially using gross capital inflows. The six surge identification method enumerated by Crystallin et al (2015) can be broadly classified into two. First, surges are periods when capital inflows increase more than the usual based on some deviation from benchmark of what "usual" is.…”

Section: Episode Typesmentioning

confidence: 99%

Not All Surges of Gross Capital Inflows are Alike

Mercado

2016

SSRN Journal

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This paper looks into the transition of a surge episode to a stop episode and differentiates between two types of surges, namely surges that end in stops and surges that end in normal episodes. Previous studies on capital flows show that surges end in output contraction, crises, and reversals of capital inflows. However, when one looks closely at the data, more than half of surges end in normal episodes at least four quarters following the last surge quarter. This study focuses on global and domestic factors that strongly correlate with the transition of surges to either stop or normal episodes, as well as which factors correlate with the magnitude of gross inflows for these two types of surges. The results show that the higher likelihood of experiencing surges ending in stops is significantly correlated with lower global risk aversion and with higher domestic output gap. The estimates also indicate that surges ending in stops are different from surges ending in normal episodes. For instance, while global risk aversion and domestic credit are significant for both surges, larger gross capital inflows are significantly correlated with higher global commodity prices for surges ending in stops, but with lower commodity prices for surges ending in normal episodes.

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“…Of course most countries have the ability to a least partially offset such direct effects through, for example, sterilized intervention, although factors such as political pressures may often keep them from doing so Amri et al (2014). find that capital flow surges are linked to credit booms considerably less frequently than is often assumed.11 Agosin and Huaita (2011) apply Minsky's theory to capital flow booms and reversals, whileEfremidze et al (2014) provide a broader analysis that draws also on complexity economics and other aspects of behavioral finance. Of course, the possibility of speculative bubbles is still challenged by some believers in efficient markets, see for exampleEugene Fama's Nobel lecture (2014).…”

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confidence: 99%

The relationships among capital flow surges, reversals and sudden stops

Efremidze

Kim

Sula

et al. 2017

JFEP

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We contribute to the growing literature on the behavior of capital flow surges and their relationships with sudden stops and capital flow reversals. We suggest a definition of true sudden stops based on gross foreign flows that is a subset of net capital flow reversals. We find that a majority of surges end in reversals of some type and this percentage is only slightly over half for surges in net capital flows and about 70 percent in the case of gross capital flows. Neither a majority of sudden stops nor capital flow reversals are preceded by surges.

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How Common are Capital Flows Surges? How They are Measured Matters -a Lot

Cited by 33 publications

References 22 publications

On the Determinants of Surges and Stops in Foreign Loans: An Empirical Investigation

On the Determinants of Surges and Stops in Foreign Loans: An Empirical Investigation

Not All Surges of Gross Capital Inflows are Alike

The relationships among capital flow surges, reversals and sudden stops

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