IDEAS home Printed from https://ideas.repec.org/a/spr/weltar/v159y2023i4d10.1007_s10290-022-00488-9.html
   My bibliography  Save this article

Higher frequency activity indicators and global bond portfolio adjustments

Author

Listed:
  • Emanuel Kohlscheen

    (Bank for International Settlements)

Abstract

This paper analyzes the relation between country-specific high-frequency activity indicators and bond holdings in the portfolio of global investors. Based on positions from more than 20,000 investment funds, it finds that bond flows are significantly impacted by high-frequency activity levels and policy rates in emerging markets. Local “pull factors” have become important drivers of bond purchases. This effect of activity data—as captured by the Purchasing Managers’ Indices (PMIs)—is stronger in the cases of India, China, Brazil and Indonesia as bond purchases in these markets appear to respond more to changes in activity survey responses. Overall, standardized coefficients indicate that an increase in a country’s PMI reading has an effect on bond purchases that is on average as large as that of a decrease in a global risk metric or a reduction in US Treasury yields. That said, during episodes of bond outflows global factors dominate.

Suggested Citation

  • Emanuel Kohlscheen, 2023. "Higher frequency activity indicators and global bond portfolio adjustments," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(4), pages 943-964, November.
    • Handle: RePEc:spr:weltar:v:159:y:2023:i:4:d:10.1007_s10290-022-00488-9
    DOI: 10.1007/s10290-022-00488-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10290-022-00488-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10290-022-00488-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Colacito, Riccardo & Riddiough, Steven J. & Sarno, Lucio, 2020. "Business cycles and currency returns," Journal of Financial Economics, Elsevier, vol. 137(3), pages 659-678.
    2. Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April.
    3. Aizenman, Joshua & Binici, Mahir, 2016. "Exchange market pressure in OECD and emerging economies: Domestic vs. external factors and capital flows in the old and new normal," Journal of International Money and Finance, Elsevier, vol. 66(C), pages 65-87.
    4. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    5. Jing Cynthia Wu & Fan Dora Xia, 2016. "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 253-291, March.
    6. Brennan, Michael J & Cao, H Henry, 1997. "International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-1880, December.
    7. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then versus Now," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 695-733.
    8. Fratzscher, Marcel, 2012. "Capital flows, push versus pull factors and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 341-356.
    9. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    10. Ambrogio Cesa‐Bianchi & Luis Felipe Cespedes & Alessandro Rebucci, 2015. "Global Liquidity, House Prices, and the Macroeconomy: Evidence from Advanced and Emerging Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 301-335, March.
    11. Forbes, Kristin J. & Warnock, Francis E., 2012. "Capital flow waves: Surges, stops, flight, and retrenchment," Journal of International Economics, Elsevier, vol. 88(2), pages 235-251.
    12. Baek, In-Mee, 2006. "Portfolio investment flows to Asia and Latin America: Pull, push or market sentiment?," Journal of Asian Economics, Elsevier, vol. 17(2), pages 363-373, April.
    13. Valentina Bruno & Hyun Song Shin, 2015. "Cross-Border Banking and Global Liquidity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(2), pages 535-564.
    14. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    15. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    16. Li, Suxiao & de Haan, Jakob & Scholtens, Bert, 2018. "Surges of international fund flows," Journal of International Money and Finance, Elsevier, vol. 82(C), pages 97-119.
    17. Sarno, Lucio & Taylor, Mark P., 1999. "Hot money, accounting labels and the permanence of capital flows to developing countries: an empirical investigation," Journal of Development Economics, Elsevier, vol. 59(2), pages 337-364, August.
    18. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    19. Sarno, Lucio & Tsiakas, Ilias & Ulloa, Barbara, 2016. "What drives international portfolio flows?," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 53-72.
    20. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    21. Ahmed, Shaghil & Zlate, Andrei, 2014. "Capital flows to emerging market economies: A brave new world?," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 221-248.
    22. Burcu Erik & Marco Jacopo Lombardi & Dubravko Mihaljek & Hyun Song Shin, 2019. "Financial conditions and purchasing managers' indices: exploring the links," BIS Quarterly Review, Bank for International Settlements, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raul Ibarra & Isela-Elizabeth Tellez-Leon, 2020. "Are all types of capital flows driven by the same factors? Evidence from Mexico," Empirical Economics, Springer, vol. 59(1), pages 461-502, July.
    2. Carlos Alba & Gabriel Cuadra & Juan R. Hernandez & Raul Ibarra, 2024. "Capital flows to emerging economies and global risk aversion during the COVID‐19 pandemic," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2804-2836, July.
    3. Erdem, F. Pinar & Geyikci, Utku Bora, 2021. "Local, global and regional shocks indices in emerging exchange rate markets," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 98-113.
    4. Xichen Wang & Cheng Yan, 2022. "Does the Relative Importance of the Push and Pull Factors of Foreign Capital Flows Vary Across Quantiles?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(2), pages 252-299, June.
    5. Hardik A. Marfatia, 2016. "The Role of Push and Pull Factors in Driving Global Capital Flows," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 62(2), pages 117-146.
    6. Rogelio V. Mercado, 2023. "Bilateral capital flows: Gravity, push and pull," International Finance, Wiley Blackwell, vol. 26(1), pages 36-63, April.
    7. 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).
    8. Benhima, Kenza & Cordonier, Rachel, 2022. "News, sentiment and capital flows," Journal of International Economics, Elsevier, vol. 137(C).
    9. Choi, Sangyup & Ciminelli, Gabriele & Furceri, Davide, 2023. "Is domestic uncertainty a local pull factor driving foreign capital inflows? New cross-country evidence," Journal of International Money and Finance, Elsevier, vol. 130(C).
    10. Koepke, Robin, 2015. "What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature," MPRA Paper 62770, University Library of Munich, Germany.
    11. Avdjiev, Stefan & Gambacorta, Leonardo & Goldberg, Linda S. & Schiaffi, Stefano, 2020. "The shifting drivers of global liquidity," Journal of International Economics, Elsevier, vol. 125(C).
    12. Davis, J. Scott & Valente, Giorgio & van Wincoop, Eric, 2021. "Global drivers of gross and net capital flows," Journal of International Economics, Elsevier, vol. 128(C).
    13. J. Scott Davis & Giorgio Valente & Eric van Wincoop, 2019. "Global Capital Flows Cycle: Impact on Gross and Net Flows," NBER Working Papers 25721, National Bureau of Economic Research, Inc.
    14. Cerutti, Eugenio & Claessens, Stijn & Puy, Damien, 2019. "Push factors and capital flows to emerging markets: why knowing your lender matters more than fundamentals," Journal of International Economics, Elsevier, vol. 119(C), pages 133-149.
    15. Broos, Menno & Ghalanos, Michalis & Kennedy, Bernard & Landbeck, Alexander & Lerner, Christina & Menezes, Paula & Schiavone, Alessandro & Tilley, Thomas & Viani, Francesca & Reinhardt, Dennis & Metzem, 2016. "Dealing with large and volatile capital flows and the role of the IMF," Occasional Paper Series 180, European Central Bank.
    16. Adugna Olani, 2016. "Dynamic Capital Inflow Transmission Of Monetary Policy To Emerging Markets," Working Paper 1358, Economics Department, Queen's University.
    17. Christian Friedrich & Pierre Guérin, 2020. "The Dynamics of Capital Flow Episodes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(5), pages 969-1003, August.
    18. Monica Singhania & Neha Saini, 2018. "Determinants of FPI in Developed and Developing Countries," Global Business Review, International Management Institute, vol. 19(1), pages 187-213, February.
    19. Ahmet Ihsan Kaya & Lutfi Erden & Ibrahim Ozkan, 2022. "Detecting capital flow surges in developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3510-3530, July.
    20. Hernandez-Vega, Marco, 2019. "Estimating Capital Flows To Emerging Market Economies With Heterogeneous Panels," Macroeconomic Dynamics, Cambridge University Press, vol. 23(5), pages 2068-2088, July.

    More about this item

    Keywords

    High-frequency activity; Capital flows; Emerging markets; Investment; Portfolio adjustment; Output; Pro-cyclicality; Spillovers;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:weltar:v:159:y:2023:i:4:d:10.1007_s10290-022-00488-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.