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Measuring the impact of financial flows on macroeconomic variables: the case of Brazil after the 2008 crisis

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  • Roberto Meurer

    () (Universidade Federal de Santa Catarina)

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    Abstract

    The effects of changes in foreign portfolio investment flows on Brazilian GDP and investment during the financial crisis of 2008 are evaluated through impulse-response functions, parsimonious models, and out of sample forecasts. Impulse-response functions results show a positive relation between fixed income flows and GDP and investment, but this relation is not as strong between the real variables and equity flows, although these flows anticipate GDP and investment behavior. Expectations seem to have an important role in explaining GDP and investment, which also have an influence on flows. The reduced vulnerability of the Brazilian economy consequently lessened the effect of the crisis when compared with previous crisis episodes.

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    File URL: http://www.economiaetecnologia.ufpr.br/textos_discussao/texto_para_discussao_ano_2011_texto_07.pdf
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    Bibliographic Info

    Paper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0117.

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    Length: 17 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:fup:wpaper:0117

    Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
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    Keywords: foreign portfolio investment; growth; investment; crisis; Brazil;

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    1. Edwards, Sebastian, 2007. "Crises and Growth: A Latin American Perspective," Revista de Historia Económica, Cambridge University Press, vol. 25(01), pages 19-51, January.
    2. Sebastian Edwards, 2009. "Sequencing of reforms, financial globalization, and macroeconomic vulnerability," NBER Chapters, in: Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR National Bureau of Economic Research, Inc.
    3. Sebastian Edwards, 2007. "Crises and growth : a Latin American perspective," Working Papers in Economic History wp07-07, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
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    8. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-62, April.
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    10. Vladimir Kuhl Teles & Maria Carolina Leme, 2010. "Fundamentals or market sentiment: what causes country risk?," Applied Economics, Taylor and Francis Journals, vol. 42(20), pages 2577-2585.
    11. Errunza, Vihang, 2001. "Foreign Portfolio Equity Investments, Financial Liberalization, and Economic Development," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 703-26, November.
    12. Hendry, David F., 2001. "Achievements and challenges in econometric methodology," Journal of Econometrics, Elsevier, vol. 100(1), pages 7-10, January.
    13. Baek, In-Mee, 2006. "Portfolio investment flows to Asia and Latin America: Pull, push or market sentiment?," Journal of Asian Economics, Elsevier, vol. 17(2), pages 363-373, April.
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