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Not all surges of gross capital inflows are alike

Author

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  • Rogelio V. Mercado

Abstract

Purpose - The purpose of this paper is to consider the transition of surge episodes to stop episodes and differentiates between two types of surges, namely, surges that end in stops and surges that end in normal episodes. Design/methodology/approach - Previous studies show that surges end in output contractions, crises, and reversals of capital inflows. However, when one looks closely at the data, more than half of surges end in normal episodes at least four quarters following the last surge quarter. Findings - The results show the varying significance of global and domestic factors correlated with the occurrence of surges leading to stops and the size of gross inflows during these two types of surges. Originality/value - The findings highlight the importance of differentiating between these two types of surges as it leaves scope for policy design in safeguarding financial stability amidst surging capital inflows.

Suggested Citation

  • Rogelio V. Mercado, 2018. "Not all surges of gross capital inflows are alike," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(2), pages 326-347, May.
    • Handle: RePEc:eme:jespps:jes-01-2017-0007
    DOI: 10.1108/JES-01-2017-0007
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    Citations

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    Cited by:

    1. Dridi, Ichrak & Boughrara, Adel, 2023. "Flexible inflation targeting and stock market volatility: Evidence from emerging market economies," Economic Modelling, Elsevier, vol. 126(C).
    2. McCully, Tuuli, 2023. "Drivers of portfolio flows into Chinese debt securities amidst China's bond market development," BOFIT Discussion Papers 8/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
    3. Annamaria Crescenzio & Etienne Lepers, 2025. "Extreme Capital Flow Episodes From the Global Financial Crisis to COVID-19: An Exploration With Monthly Data," Open Economies Review, Springer, vol. 36(1), pages 105-136, February.
    4. McCully Tuuli, 2024. "Drivers of Portfolio Flows into Chinese Debt Securities Amidst China’s Bond Market Development," China Finance and Economic Review, De Gruyter, vol. 13(3), pages 64-82.
    5. Levan Efremidze & Sungsoo Kim & Ozan Sula & Thomas D. Willett, 2017. "The relationships among capital flow surges, reversals and sudden stops," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 9(4), pages 393-413, November.
    6. Mercado, Rogelio & Noviantie, Shanty, 2020. "Financial flows centrality: Empirical evidence using bilateral capital flows," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 69(C).
    7. Rogelio V. Mercado, 2023. "Bilateral capital flows: Gravity, push and pull," International Finance, Wiley Blackwell, vol. 26(1), pages 36-63, April.
    8. Daniel Carvalho & Etienne Lepers & Rogelio Mercado, 2025. "Taming the “Capital Flows-Credit Nexus”: A Sectoral Approach," Open Economies Review, Springer, vol. 36(2), pages 373-429, April.
    9. 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).
    10. Mercado, Rogelio V., 2019. "Capital flow transitions: Domestic factors and episodes of gross capital inflows," Emerging Markets Review, Elsevier, vol. 38(C), pages 251-264.
    11. Yongseok Choi & Levan Efremidze & Ozan Sula & Thomas D. Willett, 2025. "Which Capital Flow Surge Methods Are Better at Predicting Reversals and Sudden Stops?: Balancing Type 1 and Type 2 Errors," Open Economies Review, Springer, vol. 36(3), pages 781-824, July.

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    Keywords

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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