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Volatility of Capital Flows to Emerging Economies

Author

Listed:
  • Katia Rocha

    (IPEA)

  • Ajax Moreira

    (IPEA)

Abstract

The paper proposes a panel model to the determinants of capital flow volatility to a group of 18 emerging market economies (EME) in the period of 2000 to 2011. It studies the robustness of the model regarding different volatility measures; analyses several types of gross capital inflow; focusing the role of government institutional quality and the development of domestic financial system (banks, insurance companies, and capital markets – stocks, bonds and derivatives). The EME analyzed represented roughly 95% of the Emerging Markets Bond Index Global – EMBIG in January 2013, being the biggest destination to international capital flow to EME according to the report of the Bank for International Settlements - BIS (2009). The main conclusion suggests that a reduction of capital flow volatility can be achieved by the adoption of policies that improve government institutional quality and promote development, stability and efficiency of the domestic financial system.

Suggested Citation

  • Katia Rocha & Ajax Moreira, 2013. "Volatility of Capital Flows to Emerging Economies," Brazilian Review of Finance, Brazilian Society of Finance, vol. 11(3), pages 421-448.
    • Handle: RePEc:brf:journl:v:11:y:2013:i:3:p:421-448
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    More about this item

    Keywords

    Capital Flow; Emerging Markets; Institutional Quality of the Government; Development of Domestic Financial System;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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