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Capital Debt -and Equity-Led Capital Flow Episodes

  • Kristin J. Forbes
  • Francis E. Warnock

Kristin Forbes and Francis Warnock's "Capital Flow Waves: Surges, Stops, Flight, and Retrenchment," in Journal of International Economics (forthcoming) identifies episodes of extreme capital flow movements—surges, stops, flight, and retrenchment—and finds that global factors, especially global risk, are significantly associated with extreme capital flow episodes whereas domestic macroeconomic characteristics and capital controls are less important. That analysis leads naturally to the question of which types of capital flows are driving the episodes, and if debt- and equity-led episodes differ materially. After identifying debt- and equity-led episodes, we find that most episodes of extreme capital flow movements around the world are debt-led and the factors associated with debt-led episodes are similar to the factors behind episodes identified with aggregate capital flow data. In contrast, equity-led episodes are less frequent, more idiosyncratic, and differ in nature from other episodes.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 676.

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Date of creation: Aug 2012
Date of revision:
Handle: RePEc:chb:bcchwp:676
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  1. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
  2. Mahvash S. Qureshi & Jonathan D. Ostry & Atish R. Ghosh & Marcos Chamon, 2011. "Managing Capital Inflows: The Role of Capital Controls and Prudential Policies," NBER Working Papers 17363, National Bureau of Economic Research, Inc.
  3. 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.
  4. Kevin Cowan & José De Gregorio & Alejandro Micco & Christopher Neilson, 2008. "Financial Diversification, Sudden Stops, and Sudden Starts," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt- (ed.), Current Account and External Financing, edition 1, volume 12, chapter 5, pages 159-194 Central Bank of Chile.
  5. Miroslav Misina, 2003. "What does the risk-appetite index measure?," Economics Bulletin, AccessEcon, vol. 28(6), pages A6.
  6. Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
  7. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejia, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," NBER Working Papers 10520, National Bureau of Economic Research, Inc.
  8. Carmen M. Reinhart & Vincent R. Reinhart, 2008. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER Working Papers 14321, National Bureau of Economic Research, Inc.
  9. repec:ebl:ecbull:v:28:y:2003:i:6:p:a6 is not listed on IDEAS
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