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Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?

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  • Mr. Eugenio M Cerutti
  • Mr. Gee Hee Hong

Abstract

Superficial examination of aggregate gross cross-border capital inflow data suggests that there was no substitution between portfolio inflows and bank loans in recent years. However, our novel analysis of disaggregate inflows (both by types of instrument and borrower) shows interesting heterogeneity. There has been substitution of bank loans for portfolio debt securities not only in the case of corporate and sovereign borrowers in advanced countries, but also sovereign borrowers in emerging countries. In the case of corporate borrowers in emerging markets, the relationship corresponds to complementarity across types of gross capital inflows, especially during periods of positive capital gross inflows after the global financial crisis. A large part of these patterns does not seem to be driven by a common phenomenon across countries associated with the global financial cycle, but rather by country-specific factors.

Suggested Citation

  • Mr. Eugenio M Cerutti & Mr. Gee Hee Hong, 2018. "Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?," IMF Working Papers 2018/029, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2018/029
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    Cited by:

    1. Allen, Cían, 2019. "Revisiting external imbalances: Insights from sectoral accounts," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 67-101.
    2. Cerutti, Eugenio & Claessens, Stijn & Puy, Damien, 2019. "Push factors and capital flows to emerging markets: why knowing your lender matters more than fundamentals," Journal of International Economics, Elsevier, vol. 119(C), pages 133-149.
    3. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    4. Bacchetta, Philippe & Cordonier, Rachel & Merrouche, Ouarda, 2023. "The rise in foreign currency bonds: The role of US monetary policy and capital controls," Journal of International Economics, Elsevier, vol. 140(C).
    5. Gelos, Gaston & Gornicka, Lucyna & Koepke, Robin & Sahay, Ratna & Sgherri, Silvia, 2022. "Capital flows at risk: Taming the ebbs and flows," Journal of International Economics, Elsevier, vol. 134(C).
    6. Davis, J. Scott & Valente, Giorgio & van Wincoop, Eric, 2021. "Global drivers of gross and net capital flows," Journal of International Economics, Elsevier, vol. 128(C).
    7. Igan, Deniz & Kutan, Ali M. & Mirzaei, Ali, 2020. "The real effects of capital inflows in emerging markets," Journal of Banking & Finance, Elsevier, vol. 119(C).
    8. Graciela L. Kaminsky, 2019. "Boom-Bust Capital Flow Cycles," NBER Working Papers 25890, National Bureau of Economic Research, Inc.
    9. Raphael Cunha & Andreas Kern, 2022. "Global banking and the spillovers from political shocks at the core of the world economy," The Review of International Organizations, Springer, vol. 17(4), pages 717-749, October.
    10. Bush Georgia & Cañón Salazar Carlos Iván & Gray Daniel, 2021. "Emerging market capital flows the role of fund manager portfolio allocation," Working Papers 2021-13, Banco de México.
    11. Lepers, Etienne & Mercado, Rogelio, 2021. "Sectoral capital flows: Covariates, co-movements, and controls," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    12. Seung-Gwan Baek & Chi-Young Song, 2019. "What Drives Stops in Cross-Border Bond Flows?," Sustainability, MDPI, vol. 11(14), pages 1-21, July.
    13. Yang, Zheng & You, Yu, 2023. "Surges during sudden stops: Substitution effect between sectoral capital inflows in extreme episodes," Economics Letters, Elsevier, vol. 230(C).
    14. Masahiro Inoguchi, 2021. "The impact of foreign capital flows on long‐term interest rates in emerging and advanced economies," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 268-295, May.

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