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Measuring and explaining the volatility of capital flows towards emerging countries

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  • Carmen Broto

    ()
    (Banco de España)

  • Javier Díaz-Cassou

    ()
    (Banco de España)

  • Aitor Erce-Domínguez

    ()
    (Banco de España)

Abstract

This paper analyzes the determinants of the volatility of different types of capital inflows to emerging countries. After calculating a variable that proxies capital flows volatility, we study its possible causality relations with a set of explanatory variables by type of flow through a panel data model. We show that in recent years the significance of global factors, beyond the control of emerging economies, has increased at the expense of that of country specific factors. In addition, various factors exhibit a non-robust effect on the volatility of the three different categories of capital flows, which poses additional challenges for policy-makers.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/08/Fic/dt0817e.pdf
File Function: First version, September 2008
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0817.

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Length: 33 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:bde:wpaper:0817

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Keywords: capital fl ows; volatility; panel data; emerging markets;

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References

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  1. Carmen Broto & Javier Díaz-Cassou & Aitor Erce-Domínguez, 2008. "The Sources of Capital Flows Volatility: Empirical Evidence for Emerging Countries," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 93-128, January-J.
  2. Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
  3. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  4. Helene Rey & Philippe Martin, 2005. "Globalization and Emerging Markets: With or Without Crash?," 2005 Meeting Papers 152, Society for Economic Dynamics.
  5. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  6. Itay Goldstein & Assaf Razin, 2005. "An Information-Based Trade Off between Foreign Direct Investment and Foreign Portfolio Investment," NBER Working Papers 11757, National Bureau of Economic Research, Inc.
  7. Aitor Erce, 2008. "A structural model of sovereign debt issuance: assessing the role of financial factors," Banco de Espa�a Working Papers 0809, Banco de Espa�a.
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Citations

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Cited by:
  1. Gan-Ochir Doojav & Borkhuu Gotovsuren & Tsenddorj Dorjpurev, 2012. "Financial Contagion and Volatile Capital Flows," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ56, June.
  2. Enrique Alberola & Aitor Erce & José Maria Serena, 2012. "International reserves and gross capital flows: dynamics during financial stress," Globalization and Monetary Policy Institute Working Paper 110, Federal Reserve Bank of Dallas.
  3. Paramita Mukherjee, 2011. "An exploration on volatility across India and some developed and emerging equity markets," Asia Pacific Trade and Investment Review, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 18(2), pages 79-103, December.
  4. Aitor Erce, 2012. "Does the IMF's official support affect sovereign bonds maturities?," Globalization and Monetary Policy Institute Working Paper 128, Federal Reserve Bank of Dallas.
  5. Bank for International Settlements, 2009. "Capital flows and emerging market economies," CGFS Papers, Bank for International Settlements, number 33, January.
  6. Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Banco de Espa�a Working Papers 1231, Banco de Espa�a.

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