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Dynamic effects of macroeconomic policies on categories of emerging markets’ capital inflows

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  • Adugna Olani

Abstract

Using panel and country-specific structural vector autoregressions, this paper analyzes the dynamic and size effects of the US monetary policy shock as well as domestic monetary and exchange rate shocks on gross foreign direct and portfolio investment inflows to emerging markets. While the effects of macroeconomic policy shocks are heterogeneous across countries, foreign direct investment inflow’s response to macroeconomic policy shocks is weak in contrast to the strong and on impact response of foreign portfolio investment. Structural vector autoregressions provide richer dynamic structure and a clearer comparison of ‘push’ and ‘pull’ factors in financial flows via forecast error variance decomposition. This paper does not find evidence for ‘push’ factors’ dominance in either capital inflow type or across the countries.

Suggested Citation

  • Adugna Olani, 2020. "Dynamic effects of macroeconomic policies on categories of emerging markets’ capital inflows," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 13(1), pages 1-28, January.
  • Handle: RePEc:taf:macfem:v:13:y:2020:i:1:p:1-28
    DOI: 10.1080/17520843.2019.1699133
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    Cited by:

    1. Zekeriya Yildirim & Mehmet Ivrendi, 2021. "Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-38, December.

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