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Measuring and explaining the volatility of capital flows to emerging countries

  • Broto, Carmen
  • Díaz-Cassou, Javier
  • Erce, Aitor

This paper analyzes the determinants of the volatility of the various types of capital inflows into emerging countries. After calculating a proxy of the volatility of FDI, portfolio and bank inflows, we use a panel data model to study their relationship with a broad set of explanatory variables. Our results highlight the difficulties policy-makers face in stabilizing capital flows. Thus, we show that since 2000 global factors beyond the control of emerging economies have become increasingly significant relative to country-specific drivers. However, we identify some domestic macroeconomic and financial factors that appear to reduce the volatility of certain capital flows without increasing that of others.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 8 (August)
Pages: 1941-1953

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:8:p:1941-1953
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