Advanced Search
MyIDEAS: Login to save this paper or follow this series

The cyclical properties of disaggregated capital flows

Contents:

Author Info

  • Silvio Contessi
  • Pierangelo DePace
  • Johanna Francis

Abstract

We describe the second-moment properties of the components of international capital flows and their relationship (covariance and correlation) to business cycle variables of 22 emerging and OECD countries. Disaggregated flows have different volatility properties, with debt being the most volatile and FDI the least volatile. We show that (a) inward flows are procyclical, outward and net outward flows are countercyclical for most industrial and emerging countries while, for the G-7, both inward and outward flows are procyclical and net outflows are countercyclical; (b) inward FDI flows are procyclical in industrial countries, countercyclical in emerging countries; and (c) there is no clear pattern for other equity flows and debt. Using formal statistical tests, we document changes in variability, covariance, and correlation of capital flows with a set of macroeconomic variables for G-7 countries. We find mixed evidence of changes over capital account liberalization episodes and breaks in international business cycles, and a clear increase in variance for all types and signs of flows. We estimate breaks at unknown dates in the conditional variance of each capital flow to find that they differ considerably from the breaks associated with capital account liberalization and financial globalization.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://research.stlouisfed.org/wp/2008/2008-041.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2008-041.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:fip:fedlwp:2008-041

Contact details of provider:
Postal: P.O. Box 442, St. Louis, MO 63166
Fax: (314)444-8753
Web page: http://www.stlouisfed.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Capital movements ; Business cycles;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Heathcote, Jonathan & Perri, Fabrizio, 2004. "Financial globalization and real regionalization," Journal of Economic Theory, Elsevier, vol. 119(1), pages 207-243, November.
  2. Neumann, Rebecca M. & Penl, Ron & Tanku, Altin, 2009. "Volatility of capital flows and financial liberalization: Do specific flows respond differently?," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 488-501, June.
  3. Cédric Tille & Eric van Wincoop, 2007. "International capital flows," Staff Reports 280, Federal Reserve Bank of New York.
  4. Eduardo Levy-Yeyati & Ugo Panizza & Ernesto Stein, 2002. "The Cyclical Nature of North-South FDI Flows," Business School Working Papers quince, Universidad Torcuato Di Tella.
  5. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
  6. Evans, Martin D.D. & Hnatkovska, Viktoria V., 2014. "International capital flows, returns and world financial integration," Journal of International Economics, Elsevier, vol. 92(1), pages 14-33.
  7. Patrick-Antoine Pintus, 2007. "Procyclical International Capital Flows, Debt Overhang And Volatility," Working Papers halshs-00353596, HAL.
  8. AMBLER, Steve & CARDIA, Emanuela & ZIMMERMANN, Christian, 2000. "International Business Cycles: What Are the Facts?," Cahiers de recherche 2000-05, Universite de Montreal, Departement de sciences economiques.
  9. Graciela Laura Kaminsky & Sergio L. Schmukler, 2008. "Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles," Review of Finance, European Finance Association, vol. 12(2), pages 253-292.
  10. Paolo Mauro & Andrei A. Levchenko, 2006. "Do Some Forms of Financial Flows Help Protect From Sudden Stops?," IMF Working Papers 06/202, International Monetary Fund.
  11. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
  12. Contessi, Silvio & De Pace, Pierangelo & Francis, Johanna L., 2013. "The cyclical properties of disaggregated capital flows," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 528-555.
  13. Fogli, Alessandra & Perri, Fabrizio, 2006. "The 'Great Moderation' and the US External Imbalance," CEPR Discussion Papers 6010, C.E.P.R. Discussion Papers.
  14. Neumeyer, Pablo Andrés & Perri, Fabrizio, 2004. "Business Cycles in Emerging Economies: The Role of Interest Rates," CEPR Discussion Papers 4482, C.E.P.R. Discussion Papers.
  15. Martin Uribe & Vivian Z. Yue, 2003. "Country Spreads and Emerging Countries: Who Drives Whom?," NBER Working Papers 10018, National Bureau of Economic Research, Inc.
  16. De Pace, Pierangelo, 2013. "Currency Union, Free-Trade Areas, And Business Cycle Synchronization," Macroeconomic Dynamics, Cambridge University Press, vol. 17(03), pages 646-680, April.
  17. Michael B. Devereux & Alan Sutherland, 2007. "Solving for Country Portfolios in Open Economy Macro Models," IMF Working Papers 07/284, International Monetary Fund.
  18. 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.
  19. Brian M. Doyle & Jon Faust, 2003. "Breaks in the variability and co-movement of G-7 economic growth," International Finance Discussion Papers 786, Board of Governors of the Federal Reserve System (U.S.).
  20. Classens, S. & Dooley, M.P. & Warner, A., 1995. "Portfolio Capital Flows: Hot or Cold," Papers 501, Harvard - Institute for International Development.
  21. Smith, Katherine A. & Valderrama, Diego, 2009. "The composition of capital inflows when emerging market firms face financing constraints," Journal of Development Economics, Elsevier, vol. 89(2), pages 223-234, July.
  22. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, vol. 97(1), pages 93-115, July.
  23. Fernando Broner & Roberto Rigobon, 2004. "Why are capital flows so much more volatile in emerging than in developed countries?," Economics Working Papers 862, Department of Economics and Business, Universitat Pompeu Fabra.
  24. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  25. Graciela Kaminsky & Sergio Schmukler, 2003. "Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization," NBER Working Papers 9787, National Bureau of Economic Research, Inc.
  26. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization," IMF Working Papers 06/189, International Monetary Fund.
  27. Kose, M. Ayhan & Prasad, Eswar S. & Terrones, Marco E., 2009. "Does financial globalization promote risk sharing?," Journal of Development Economics, Elsevier, vol. 89(2), pages 258-270, July.
  28. Alexander D. Rothenberg & Francis E. Warnock, 2006. "Sudden Flight and True Sudden Stops," NBER Working Papers 12726, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Silvio Contessi & Johanna Francis, 2009. "U.S. commercial bank lending through 2008:Q4: new evidence from gross credit flows," Working Papers 2009-011, Federal Reserve Bank of St. Louis.
  2. Silvio Contessi & Pierangelo De Pace & Johanna Francis, 2010. "Changes in the Second-Moment Properties of Disaggregated Capital Flows," Fordham Economics Discussion Paper Series dp2010-10, Fordham University, Department of Economics.
  3. Byrne, Joseph P. & Fiess, Norbert, 2011. "International Capital Flows to Emerging and Developing Countries: National and Global Determinants," SIRE Discussion Papers 2011-03, Scottish Institute for Research in Economics (SIRE).
  4. Eylem Ersal Kiziler, 2011. "Growth Shocks and Portfolio Flows," Working Papers 11-02, UW-Whitewater, Department of Economics.
  5. Burns, Andrew & Kida, Mizuho & Lim, Jamus Jerome & Mohapatra, Sanket & Stocker, Marc, 2014. "Unconventional monetary policy normalization in high-income countries : implications for emerging market capital flows and crisis risks," Policy Research Working Paper Series 6830, The World Bank.
  6. Silvio Contessi & Pierangelo De Pace, 2011. "The (non-)resiliency of foreign direct investment in the United States during the 2007-2009 financial crisis," Working Papers 2011-037, Federal Reserve Bank of St. Louis.
  7. Silvio Contessi & Pierangelo DePace & Johanna Francis, 2008. "The cyclical properties of disaggregated capital flows," Working Papers 2008-041, Federal Reserve Bank of St. Louis.
  8. Francis, Johanna L. & Aykut, Dilek & Tereanu, Eugen, 2014. "The cost of private debt over the credit cycle," Journal of International Money and Finance, Elsevier, vol. 41(C), pages 146-181.
  9. Silvio Contessi & Ariel Weinberger, 2009. "Foreign direct investment, productivity, and country growth: an overview," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 61-78.
  10. Yung Chul Park, 2011. "The Role of Macroprudential Policy for Financial Stability in East Asia’s Emerging Economies," Macroeconomics Working Papers 23252, East Asian Bureau of Economic Research.
  11. Silvio Contessi & Pierangelo DePace, 2008. "Do European capital flows comove?," Working Papers 2008-042, Federal Reserve Bank of St. Louis.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2008-041. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.