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Determinants of global capital volatility in the BRICS grouping

Author

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  • Melis, Michael
  • Bonga-Bonga, Lumengo

Abstract

This paper assesses the determinants of capital flow volatility in the BRICS economies by differentiating between foreign direct investment (FDI) and portfolio capital flow volatilities. Moreover, the paper distinguishes between external variables, policy variables and control variables among the important drivers of capital flow volatiltiy in these economies. Use is made of the general method of moment (GMM) estimation in panel regression for this end. The findings of the empirical analysis show, among other things, the importance of global volatility spillover in driving capital flow volatility in the BRICS countries.

Suggested Citation

  • Melis, Michael & Bonga-Bonga, Lumengo, 2019. "Determinants of global capital volatility in the BRICS grouping," MPRA Paper 94125, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:94125
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    File URL: https://mpra.ub.uni-muenchen.de/94125/1/MPRA_paper_94125.pdf
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    References listed on IDEAS

    as
    1. Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.
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    3. Carmen Broto & Javier Díaz-Cassou & Aitor Erce-Domínguez, 2008. "The Sources of Capital Flows Volatility: Empirical Evidence for Emerging Countries," Money Affairs, CEMLA, vol. 0(1), pages 93-128, January-J.
    4. Maria Sole Pagliari & Swarnali Ahmed Hannan, 2017. "The Volatility of Capital Flows in Emerging Markets: Measures and Determinants," Departmental Working Papers 201710, Rutgers University, Department of Economics.
    5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    6. Scott W. Hegerty, 2014. "Do International Capital Flows Worsen Macroeconomic Volatility in Transition Economies?," Bulletin of Applied Economics, Risk Market Journals, vol. 1(1), pages 1-13.
    7. Renu Kohli, 2015. "Capital Flows and Exchange Rate Volatility in India: How Crucial Are Reserves?," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 577-591, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    capital flow volatility; BRICS; GMM panel regression; FDI; portfolio;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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