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Analysing sectoral capital flows: Covariates, co-movements, and controls

Author

Listed:
  • Etienne Lepers

    (OECD)

  • Rogelio Mercado

    (Asian Development Bank)

Abstract

This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies from 2000-18. This includes direct, portfolio and other investments to and from five sectors: central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs) and a corresponding dataset on capital controls imposed on these sectors. The paper uses this data to examine the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. The findings show that: 1) private sectoral flows have varying sensitivities to global financial conditions and different cyclicality with respect to output growth. For instance, unlike other flows, NFCs respond to global commodity prices but not global risk aversion and, unlike banks, OFCs cut foreign investment in periods of domestic investment; 2) co-movements of resident and non-resident OFC sectoral flows add to the observed positive correlation between gross inflows and outflows; and, 3) the tightening of capital controls on NFCs and OFCs appear effective in reducing the volume of flows to these sectors.

Suggested Citation

  • Etienne Lepers & Rogelio Mercado, 2021. "Analysing sectoral capital flows: Covariates, co-movements, and controls," OECD Working Papers on International Investment 2021/04, OECD Publishing.
    • Handle: RePEc:oec:dafaaa:2021/04-en
    DOI: 10.1787/ad9e6b1d-en
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    Citations

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    Cited by:

    1. Rogelio Mercado Jr. & Luca Sanfilippo, 2024. "Multi-Sector Bond Funds: New Evidence on Global and Domestic Drivers and Effectiveness of Capital Account Measures," CAMA Working Papers 2024-28, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Harrison, Andre & Reed, Robert R., 2023. "Gross capital inflows, the U.S. economy, and the response of the Federal Reserve," Journal of International Money and Finance, Elsevier, vol. 139(C).
    3. Daniel Carvalho & Etienne Lepers & Rogelio Jr Mercado, 2021. "Taming the "Capital Flows-Credit Nexus": A Sectoral Approach," Trinity Economics Papers tep0921, Trinity College Dublin, Department of Economics.

    More about this item

    Keywords

    capital controls; capital flows correlations; sectoral capital flows;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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