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The “Butterfly Effect” of Volatility in Net International Capital Flows: An Analysis of Co-Movement Characteristics and Influencing Factors

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  • Hang Luo

    (Sino-Danish College, University of Chinese Academy of Sciences, Beijing 100190, China
    Sino-Danish Center for Education and Research, University of Chinese Academy of Sciences, Beijing 100190, China
    School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

  • Jianwei Tan

    (Academy of Mathematics and Systems Science, University of Chinese Academy of Sciences, Beijing 100190, China)

Abstract

This paper employs social network analysis to investigate the characteristics and determinants of co-movement in the volatility of net cross-border capital flows. We have identified a significant “small-world” pattern in the co-movement network. Economies with highly positive or negative co-movement of volatility in net capital flows display regional differences. Furthermore, economies with high trade intensity, large interest-rate spreads, membership in the same economic organization, and geographical adjacency exhibit significantly increased co-movement of volatility in net private capital flows and net other investment flows. Economies with large differences in economic growth present less co-movement of volatility in net portfolio flows.

Suggested Citation

  • Hang Luo & Jianwei Tan, 2024. "The “Butterfly Effect” of Volatility in Net International Capital Flows: An Analysis of Co-Movement Characteristics and Influencing Factors," Sustainability, MDPI, vol. 16(17), pages 1-18, August.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:17:p:7302-:d:1463663
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