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Capital Flows, Push versus Pull Factors and the Global Financial Crisis

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  • Marcel Fratzscher

Abstract

The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks – key crisis events as well as changes to global liquidity and risk – have exerted a large effect on capital flows both in the crisis and in the recovery. However, these effects have been highly heterogeneous across countries, with a large part of this heterogeneity being explained by differences in the quality of domestic institutions, country risk and the strength of domestic macroeconomic fundamentals. Comparing and quantifying these effects shows that common factors (“push” factors) were overall the main drivers of capital flows during the crisis, while country-specific determinants (“pull” factors) have been dominant in accounting for the dynamics of global capital flows in 2009 and 2010, in particular for emerging markets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17357.

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Date of creation: Aug 2011
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Publication status: published as Marcel Fratzscher. "Capital Flows, Push versus Pull Factors and the Global Financial Crisis," in Charles Engel, Kristin Forbes, and Jeffrey Frankel, organizers, "Global Financial Crisis" Elsevier, Journal of International Economics 88(2) (2012)
Handle: RePEc:nbr:nberwo:17357

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  1. MINTs are fresher than BRICS, but don't expect massive growth
    by Kate Phylaktis, Director, Emerging Markets Group, Cass Business School at City University London in The Conversation on 2014-02-03 14:34:11
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