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Gross Capital Inflows to Banks, Corporates and Sovereigns

Listed author(s):
  • Stefan Avdjiev
  • Bryan Hardy
  • Sebnem Kalemli-Ozcan
  • Luis Servén

We construct a new data set for gross capital inflows during 1996–2014 for 85 countries at a quarterly frequency. We decompose debt inflows by borrower type: banks, corporates and sovereigns. Using our new data, we present dynamic and cross sectional patterns in capital inflows as a function of global push factors and countries’ own business cycles. This exercise reveals that patterns evident in aggregate capital flows data do not hold up consistently across different borrower types. When global risk appetite is low, as proxied by high VIX, capital flows into banks and corporates decline both in advanced economies (AE) and in emerging markets (EM). This is also true for EM sovereigns but not for AE, whose sovereign borrowing does not respond to VIX. Banks’ and corporates’ borrowing, both in EM and in AE are procyclical, whereas EM’s sovereigns exhibit counter-cyclical borrowing. Capital inflows are procyclical in all assets classes except for portfolio debt inflows to EM, which exhibit a countercyclical pattern driven mainly by EM sovereigns and to some extent by EM corporates. Our results highlight the importance of separating capital flows by borrower type for understanding potential systemic risks related to capital flows, and show the difficulty of establishing robust stylized facts about capital flows’ dynamics in a mixed sample of emerging and advanced countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23116.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23116
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