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Bilateral portfolio dynamics during the global financial crisis

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  • Galstyan, Vahagn
  • Lane, Philip R.

Abstract

There has been considerable bilateral variation in the pattern of portfolio capital flows during the global financial crisis: for a given destination, investors from different countries adjusted their holdings to different degrees. We show that the size of the initial bilateral holding, geographical distance, common language, the level of trade and common institutional linkages help to explain the pattern of adjustment. These bilateral factors are more important for equities than for bonds and for investors from developing countries than for investors from advanced countries.

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File URL: http://www.sciencedirect.com/science/article/pii/S0014292112001407
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 57 (2013)
Issue (Month): C ()
Pages: 63-74

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Handle: RePEc:eee:eecrev:v:57:y:2013:i:c:p:63-74
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

Keywords: International capital flows; International portfolios; External adjustment; Financial crises;

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Find related papers by JEL classification:
  • F30 - International Economics - - International Finance - - - General
  • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  1. Portes, Richard & Rey, Hélène, 1999. "The Determinants of Cross-Border Equity Flows," CEPR Discussion Papers 2225, C.E.P.R. Discussion Papers.
  2. Philip R. Lane & Gian Maria Milesi Ferretti, 2011. "External Adjustment and the Global Crisis," NBER Working Papers 17352, National Bureau of Economic Research, Inc.
  3. Antonin Aviat & Nicolas Coeurdacier, 2007. "The geography of trade in goods and asset holdings," Post-Print hal-01045223, HAL.
  4. Broner, Fernando & Didier, Tatiana & Erce, Aitor & Schmukler, Sergio L., 2011. "Gross capital flows : dynamics and crises," Policy Research Working Paper Series 5768, The World Bank.
  5. Stijn Van Nieuwerburgh & Laura Veldkamp, 2009. "Information Immobility and the Home Bias Puzzle," Journal of Finance, American Finance Association, vol. 64(3), pages 1187-1215, 06.
  6. Aviat, Antonin & Coeurdacier, Nicolas, 2006. "The Geography of Trade in Goods and Asset Holdings," ESSEC Working Papers DR 06012, ESSEC Research Center, ESSEC Business School.
  7. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2004. "International Investment Patterns," CEPR Discussion Papers 4499, C.E.P.R. Discussion Papers.
  8. Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
  9. Philip R. Lane, 2006. "Global Bond Portfolios and EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp168, IIIS.
  10. Cedric Tille & Eric van Wincoop, 2007. "International Capital Flows," Working Papers 122007, Hong Kong Institute for Monetary Research.
  11. Gian-Maria Milesi-Ferretti & Cédric Tille, 2010. "The Great Retrenchment: International Capital Flows During the Global Financial Crisis," IHEID Working Papers 18-2010, Economics Section, The Graduate Institute of International Studies, revised 15 Sep 2010.
  12. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g708pipbp is not listed on IDEAS
  13. Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp346, IIIS.
  14. Swati Ghosh & Holger Wolf, 2000. "Is There a Curse of Location? Spatial Determinants of Capital Flows to Emerging Markets," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 137-156 National Bureau of Economic Research, Inc.
  15. Yohei Okawa & Eric van Wincoop, 2010. "Gravity in International Finance," Working Papers 072010, Hong Kong Institute for Monetary Research.
  16. Calvo, Guillermo A. & Mendoza, Enrique G., 2000. "Rational contagion and the globalization of securities markets," Journal of International Economics, Elsevier, vol. 51(1), pages 79-113, June.
  17. Sebastian Edwards, 2000. "Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies," NBER Books, National Bureau of Economic Research, Inc, number edwa00-1.
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Cited by:

  1. Franco Ruzzenenti & Andreas Joseph & Elisa Ticci & Pietro Vozzella & Giampaolo Gabbi, 2015. "Interactions between financial and environmental networks in OECD countries," Papers 1501.04992, arXiv.org, revised Apr 2015.
  2. Hellmanzik, Christiane & Schmitz, Martin, 2016. "Taking gravity online: the role of virtual proximity in international finance," Working Paper Series 1879, European Central Bank.
  3. Philip R. Lane, 2012. "Financial Globalisation and the Crisis," BIS Working Papers 397, Bank for International Settlements.
  4. Beck, Roland & Georgiadis, Georgios & Gräb, Johannes, 2015. "The geography of the great rebalancing in euro area bond markets during the sovereign debt crisis," Working Paper Series 1839, European Central Bank.
  5. Caroline Mehigan, 2016. "Bilateral Adjustment of Bank Assets: Boom and Bust," Trinity Economics Papers tep0616, Trinity College Dublin, Department of Economics.
  6. Vincent Bouvatier & Anne Laure Delatte, 2015. "Waves of international banking integration: A tale of regional differences," Sciences Po publications info:hdl:2441/27s0rlpcib9, Sciences Po.
  7. Philip R. Lane, 2013. "Cross-Border Financial Integration in Asia and the Macro-Financial Policy Framework," The Institute for International Integration Studies Discussion Paper Series iiisdp423, IIIS.
  8. Margaux MacDonald, 2016. "International Capital Market Frictions and Spillovers from Quantitative Easing," Working Papers 1346, Queen's University, Department of Economics.
  9. Floreani, Vincent Arthur & Habib, Maurizio Michael, 2015. "Financial exposure to the euro area before and after the crisis: home bias and institutions at home," Working Paper Series 1799, European Central Bank.
  10. Bouvatier, Vincent & Delatte, Anne-Laure, 2014. "International Banking: the Isolation of the Euro Area," CEPR Discussion Papers 10264, C.E.P.R. Discussion Papers.

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