Journal ArticleDOI
Capital Flow Waves: Surges, Stops, Flights and Retranchment
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This article analyzed the drivers of international waves in capital flows and found that global factors, especially global risk, are the most important determinants of these episodes, while domestic macroeconomic characteristics are generally less important, although changes in domestic economic growth influence episodes caused by foreigners.Abstract:
This paper analyzes the drivers of international waves in capital flows. We build on the literature on “sudden stops” and “bonanzas” to develop a new methodology for identifying episodes of extreme capital flow movements using quarterly data on gross inflows and gross outflows, differentiating activity by foreigners and domestics. We identify episodes of “surge”, “stop”, “flight”, and “retrenchment” and show how our approach yields fundamentally different results than the previous literature that used measures of net flows. Global factors, especially global risk, are the most important determinants of these episodes. Contagion, especially through trade and the bilateral exposure of banking systems, is important in determining stop and retrenchment episodes. Domestic macroeconomic characteristics are generally less important, although changes in domestic economic growth influence episodes caused by foreigners. We find little role for capital controls in reducing capital flow waves. The results help provide insights for different theoretical approaches explaining crises and capital flow volatility.read more
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Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence
Hélène Rey,Hélène Rey,Hélène Rey +2 more
TL;DR: In this paper, the authors argue that the global financial cycle is not aligned with countries' specific macroeconomic conditions and propose a convex combination of targeted capital control, macroprudential control, and stricter limit on leverage for all financial intermediaries.
Posted Content
Capital Flows and the Risk-Taking Channel of Monetary Policy
Valentina Bruno,Hyun Song Shin +1 more
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Stories of the Twentieth Century for the Twenty-First
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Journal ArticleDOI
Capital flows to emerging market economies: A brave new world?
Shaghil Ahmed,Andrei Zlate +1 more
TL;DR: In this paper, the authors examined the determinants of net private capital in emerging market economies and found that growth and interest rate dierentials between EMEs and advanced economies and global risk appetite are statistically and economically important determinants.
Journal ArticleDOI
Cross-Border Banking and Global Liquidity
Valentina Bruno,Hyun Song Shin +1 more
TL;DR: This paper investigated global factors associated with bank capital and showed that local currency appreciation is associated with higher leverage of the banking sector, thereby providing a conceptual bridge between exchange rates and financial stability.
References
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Journal ArticleDOI
Deciphering the Liquidity and Credit Crunch 2007-08
TL;DR: The authors summarizes and explains the main events of the liquidity and credit crunch in 2007-08, starting with the trends leading up to the crisis and explaining how four different amplification mechanisms magnified losses in the mortgage market into large dislocations and turmoil in financial markets.
Journal ArticleDOI
The External Wealth of Nations Mark Ii: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004
Philip R. Lane,Philip R. Lane,Philip R. Lane,Gian Maria Milesi-Ferretti,Gian Maria Milesi-Ferretti +4 more
TL;DR: In this article, the authors construct estimates of external assets and liabilities for 145 countries for the period 1970-2004, focusing on trends in net and gross external positions, and the composition of international portfolios.
Journal ArticleDOI
A New Measure of Financial Openness
Menzie D. Chinn,Hiro Ito +1 more
TL;DR: In this paper, a new index is proposed to measure the extent of openness in cross-border financial transactions, based on the information from the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER).
Journal ArticleDOI
“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors
TL;DR: The characteristics of recent capital inflows into Latin America are discussed in this paper, where it is argued that these inflows are partly explained by conditions outside the region, like the recession in the United States and lower international interest rates.
Journal ArticleDOI
International Portfolio Investment Flows
Michael J. Brennan,H. Henry Cao +1 more
TL;DR: In this paper, the authors developed a model of international equity portfolio investment flows based on differences in informational endowments between foreign and domestic investors, and showed that when domestic investors possess a cumulative information advantage over foreign investors about their domestic market, investors tend to purchase foreign assets in periods when the return on foreign assets is high and to sell when the returning is low.