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What Drives International Portfolio Flows?

Listed author(s):
  • Lucio Sarno

    ()

    (Faculty of Finance, Cass Business School, UK; The Rimini Centre for Economic Analysis, Italy)

  • Ilias Tsiakas

    ()

    (University of Guelph, Canada; The Rimini Centre for Economic Analysis, Italy)

  • Barbara Ulloa

    ()

    (Central Bank of Chile)

Understanding what drives international portfolio flows has important policy implications for countries wishing to exert some control on the size, direction and volatility of the flows. This paper empirically assesses the relative contribution of common (push) and country-specific (pull) factors to the variation of bond and equity flows from the US to 55 other countries. Using a Bayesian dynamic latent factor model, we find that more than 80% of the variation in bond and equity flows is due to push factors from the US to other countries. Hence global economic forces seem to prevail over domestic economic forces in explaining movements in international portfolio flows. The dynamics of push and pull factors can be partially explained by US and foreign economic fundamentals.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 15-16.

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Date of creation: Mar 2015
Handle: RePEc:rim:rimwps:15-16
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