Capital Debt -and Equity-Led Capital Flow Episodes
AbstractKristin Forbes and Francis Warnock's "Capital Flow Waves: Surges, Stops, Flight, and Retrenchment," in Journal of International Economics (forthcoming) identifies episodes of extreme capital flow movements—surges, stops, flight, and retrenchment—and finds that global factors, especially global risk, are significantly associated with extreme capital flow episodes whereas domestic macroeconomic characteristics and capital controls are less important. That analysis leads naturally to the question of which types of capital flows are driving the episodes, and if debt- and equity-led episodes differ materially. After identifying debt- and equity-led episodes, we find that most episodes of extreme capital flow movements around the world are debt-led and the factors associated with debt-led episodes are similar to the factors behind episodes identified with aggregate capital flow data. In contrast, equity-led episodes are less frequent, more idiosyncratic, and differ in nature from other episodes.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 676.
Date of creation: Aug 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-IFN-2012-09-09 (International Finance)
- NEP-OPM-2012-09-09 (Open Economy Macroeconomic)
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