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How Persistent are International Capital Flows?

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  • Vahagn Galstyan

Abstract

This paper documents the dynamic properties of the current account, trade balance and international capital flows. For this purpose, three different approaches are taken: probit, non-parametric estimation and an asymmetric autoregression. The probabilistic approach shows that, in general, deficits and net inflows tend to be more persistent than surpluses and net outflows. This result is robust to either specification of pooled and country-specific probits. Current account reversals have a significant effect on the persistence of capital flows, especially in developing countries. The latter also have more persistent deficits and net inflows than industrial countries. The results of non-parametric estimation are in line with the results obtained from the probit. In the case of asymmetric autoregression, we find that surpluses are more persistent than deficits: although the probability of remaining in a surplus state is lower, the scale of surpluses tends to show more persistence than the scale of deficits.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp232.

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Date of creation: 09 Nov 2007
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Handle: RePEc:iis:dispap:iiisdp232

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  1. Georgios Chortareas & George Kapetanios & Merih Uctum, 2003. "An Investigation of Current Account Solvency in Latin America Using Non Linear Stationarity Tests," Working Papers 485, Queen Mary, University of London, School of Economics and Finance.
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