Open AccessPosted Content
Gross Capital Flows: Dynamics and Crises
Reads0
Chats0
TLDR
The authors analyzed the joint behavior of international capital flows by foreign and domestic agents over the business cycle and during financial crises and found that gross capital flows are very large and volatile, especially relative to net capital flows.Abstract:
This paper analyzes the joint behavior of international capital flows by foreign and domestic agents -- gross capital flows -- over the business cycle and during financial crises. The authors show that gross capital flows are very large and volatile, especially relative to net capital flows. When foreigners invest in a country, domestic agents tend to invest abroad, and vice versa. Gross capital flows are also pro-cyclical, with foreigners investing more in the country and domestic agents investing more abroad during expansions. During crises, especially during severe ones, there is retrenchment, that is, a reduction in both capital inflows by foreigners and capital outflows by domestic agents. This evidence sheds light on the nature of shocks driving capital flows and helps discriminate among existing theories. The findings seem consistent with shocks that affect foreign and domestic agents asymmetrically, such as sovereign risk and asymmetric information.read more
Citations
More filters
Journal ArticleDOI
Sudden Stops, Financial Crises, and Leverage
TL;DR: In this article, a business cycle model with an endogenous collateral constraint that induces amplification and asymmetry in the responses of macro-aggregates to shocks is presented, and the evidence from Sudden Stops in emerging economies shows that financial crashes are generally followed by major economic crises.
Journal ArticleDOI
Sovereign Risk and Secondary Markets
TL;DR: In this paper, the authors show that sovereign risk does not destroy all foreign asset trade, but only if default penalties are insufficient and the secondary markets work imperfectly, and that without this assumption, foreign asset trading is possible even in the absence of default penalties.
Journal ArticleDOI
International Reserves and Rollover Risk
TL;DR: In this article, the authors study the optimal accumulation of international reserves in a quantitative model of sovereign default with long-term debt and a risk-free asset and show that income windfalls, improved policy frameworks, and an increase in the importance of rollover risk imply increases in the optimal holdings of reserves that are consistent with the upward trend in reserves in emerging economies.
Journal ArticleDOI
Push Factors and Capital Flows to Emerging Markets: Why Knowing Your Lender Matters More Than Fundamentals
TL;DR: In this article, the behavior of gross capital inflows across 34 emerging markets (EMs) was analyzed and it was shown that aggregate inflows to EMs co-move considerably.
Journal ArticleDOI
Home away from home? Foreign demand and London house prices
TL;DR: In this article, the authors developed a cross-sectional identification approach, motivated by the insight that investors may differ in their "preferred habitats" within a broad asset class and applied the method to the question of whether foreign capital is responsible for residential real estate price movements in global cities such as London and New York, especially during crises.