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What Drives International Portfolio Flows?

Author

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  • 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)

Abstract

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.

Suggested Citation

  • Lucio Sarno & Ilias Tsiakas & Barbara Ulloa, 2015. "What Drives International Portfolio Flows?," Working Paper series 15-16, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:15-16
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    References listed on IDEAS

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    1. repec:eee:riibaf:v:42:y:2017:i:c:p:544-558 is not listed on IDEAS
    2. repec:bde:journl:y:2017:i:3:d:aa:n:4 is not listed on IDEAS
    3. Hardik A. Marfatia, 2016. "The Role of Push and Pull Factors in Driving Global Capital Flows," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 62(2), pages 117-146.
    4. Ángel Estrada & Luis Molina & Paula Sánchez & Francesca Viani, 2017. "Towards efficient capital flow management," Economic Bulletin, Banco de España;Economic Bulletin Homepage, issue 1/2017.
    5. Shugo Yamamoto, 2015. "Banking Network Amplification Effects on Cross-Border Bank Flows," Discussion Papers 1533, Graduate School of Economics, Kobe University.
    6. repec:eee:jimfin:v:83:y:2018:i:c:p:23-43 is not listed on IDEAS
    7. Di Filippo, Gabriele, 2017. "What Drives Gross Flows in Equity and Investment Fund Shares in Luxembourg?," MPRA Paper 84200, University Library of Munich, Germany, revised 26 Jan 2018.
    8. Tng Boon Hwa & Mala Raghavan & Teh Tian Huey, 2017. "Macro-financial effects of portfolio flows: Malaysia’s experience," CAMA Working Papers 2017-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Gelman, Maria & Jochem, Axel & Reitz, Stefan, 2016. "Transmission of global financial shocks to EMU member states: The role of monetary policy and national factors," Discussion Papers 23/2016, Deutsche Bundesbank.
    10. Faek Menla Ali & Fabio Spagnolo & Nicola Spagnolo, 2017. "Portfolio flows and the US dollar–yen exchange rate," Empirical Economics, Springer, vol. 52(1), pages 179-189, February.
    11. repec:eee:riibaf:v:42:y:2017:i:c:p:312-320 is not listed on IDEAS

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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