Policy Uncertainty Spillovers to Emerging Markets - Evidence from Capital Flows

Abstract

Nous étudions dans quelle mesure l'incertitude politique des pays avancés influence les flux de capitaux vers les pays émergents (PE). Nous trouvons qu'une augmentation de l'incertitude politique aux États-Unis réduit significativement les flux obligataires et actions vers les PE. Inversement, une augmentation de l'incertitude politique Européenne a des effets différents entre flux obligataires et actions : les flux actions augmentent alors que les flux obligataires diminuent. L'effet de l'incertitude politique sur les flux de capitaux varie dans le temps et dépend des conditions globales et domestiques.Après le début de la crise financière, une plus grande partie de l'effet de l'incertitude politique sur les flux de capitaux fut transmise via l'incertitude financière globale. Nous trouvons de plus des changements structurels dans l'impact des déterminants de flux de capitaux au cours du 2nd semestre 2007 puis fin 2010. Pour les deux types de flux, le niveau de l'incertitude financière globale explique ces non linéarités. Enfin, le niveau de risque de défaut de chaque pays explique aussi les non linéarités pour les flux actions.

Sudden stops of international fund flows: Occurrence and magnitude

“…This variable has been used in recent research on the drivers of capital flows (cf. Calderón & Kubota, ; Gauvin, McLoughlin, & Reinhardt, ). Higher values indicate more policy uncertainty.…”

“…CPI inflation is included as a proxy for monetary stability (Calderón & Kubota, ). Short‐term interest rates are also included because international capital flows are sensitive to interest rate differentials (Fratzscher, ; Gauvin et al, ). In addition, Cowan and Raddatz () point out that the accumulation of reserves can prevent sudden stops and provide liquidity in case a sudden stop occurs.…”

“…As financial market performance indicators, we include domestic equity returns , because some previous studies report that higher equity returns tend to decrease the likelihood of a sudden stop (Fratzscher, ; Gauvin et al, ). We also include the expected real effective exchange rate depreciation (Calderón & Kubota, ; Ghosh et al, ), which is calculated by subtracting each country’s real effective exchange rate from its corresponding HP trend .…”

Cross-Country-Heterogeneous and Time-Varying Effects of Unconventional Monetary Policies in AEs on Portfolio Inflows to EMEs

“…As far as methodology, Gauvin et al (2013) use a PSTR model like that in this paper to study portfolio flows to EMEs. They find time-dimensional nonlinearity of the effects of US and EU policy uncertainty on bond and equity inflows to EMEs with time as a threshold variable.…”

Elections and Capital Flows

“…To the best of my knowledge, this is the first paper to estimate the impact of elections on gross capital flows using a large panel data set. Gauvin, McLoughlin, and Reinhardt () find that policy uncertainty in the U.S. and the European Union affects capital flows to emerging economies, although they do not look at the effects of election‐related policy uncertainty. In addition, they analyze uncertainty in the source country, not the recipient country.…”