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Capital Debt -and Equity-Led Capital Flow Episodes

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  • Kristin J. Forbes
  • Francis E. Warnock

Abstract

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.

Suggested Citation

  • Kristin J. Forbes & Francis E. Warnock, 2012. "Capital Debt -and Equity-Led Capital Flow Episodes," Working Papers Central Bank of Chile 676, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:676
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    File URL: http://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc676.pdf
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    References listed on IDEAS

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    1. 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.
    2. Molina, Danielken & Roa, Monica, 2014. "The Effect of Credit on the Export Performance of Colombian Exporters," MPRA Paper 56137, University Library of Munich, Germany.
    3. Mahvash S. Qureshi & Jonathan D. Ostry & Atish R. Ghosh & Marcos Chamon, 2011. "Managing Capital Inflows: The Role of Capital Controls and Prudential Policies," NBER Chapters,in: Global Financial Crisis National Bureau of Economic Research, Inc.
    4. Carmen Reinhart & Vincent Reinhart, 2009. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER Chapters,in: NBER International Seminar on Macroeconomics 2008, pages 9-62 National Bureau of Economic Research, Inc.
    5. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    6. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
    7. 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.
    8. Miroslav Misina, 2003. "What does the risk-appetite index measure?," Economics Bulletin, AccessEcon, vol. 28(6), pages 1-6.
    9. repec:ebl:ecbull:v:28:y:2003:i:6:p:a6 is not listed on IDEAS
    10. Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
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    Cited by:

    1. Ayala, Diana & Nedeljkovic, Milan & Saborowski, Christian, 2017. "What slice of the pie? The corporate bond market boom in emerging economies," Journal of Financial Stability, Elsevier, vol. 30(C), pages 16-35.
    2. Andreas Hoffmann, 2014. "Zero-interest Rate Policy and Unintended Consequences in Emerging Markets," The World Economy, Wiley Blackwell, vol. 37(10), pages 1367-1387, October.
    3. Elod Takats & Judit Temesvary, 2016. "The currency dimension of the bank lending channel in international monetary transmission," BIS Working Papers 600, Bank for International Settlements.
    4. Elod Takats & Judit Temesvary, 2017. "Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum," Finance and Economics Discussion Series 2017-123, Board of Governors of the Federal Reserve System (U.S.).
    5. Claudio Raddatz & Diego Saravia & Jaume Ventura, 2015. "Global Liquidity, Spillovers to Emerging Markets and Policy Responses: An Overview," Central Banking, Analysis, and Economic Policies Book Series,in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 1, pages 001-011 Central Bank of Chile.

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