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Does the Relative Importance of the Push and Pull Factors of Foreign Capital Flows Vary Across Quantiles?

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  • Xichen Wang

    (Chongqing Technology and Business University)

  • Cheng Yan

    (University of Essex)

Abstract

We empirically gauge the relative importance of the various push and pull factors for the magnitude of foreign flows to 51 emerging markets (EMs) across quantiles. We propose a quantile regression dynamic panel model with fixed effects and reveal several new findings: (a) Global risk aversion and regional contagion are generally significant across most quantiles. (b) Foreign short-term flows retreat less from EMs with stronger fundamentals during stress episodes. (c) EMs that previously experienced larger portfolio debt and bank inflows tend to suffer more during stress episodes. Hence, we provide novel evidence supporting the global financial cycle hypothesis, investor differentiation hypothesis, and the “more-in-more-out” hypothesis.

Suggested Citation

  • Xichen Wang & Cheng Yan, 2022. "Does the Relative Importance of the Push and Pull Factors of Foreign Capital Flows Vary Across Quantiles?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(2), pages 252-299, June.
    • Handle: RePEc:pal:imfecr:v:70:y:2022:i:2:d:10.1057_s41308-021-00151-7
    DOI: 10.1057/s41308-021-00151-7
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    1. Mikhail Stolbov & Maria Shchepeleva, 2022. "In Search of Global Determinants of National Credit-to-GDP Gaps," Risks, MDPI, vol. 10(12), pages 1-22, December.

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    More about this item

    Keywords

    Foreign lows; Emerging market; Surge; Sudden stop; Global financial cycle;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G1 - Financial Economics - - General Financial Markets

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