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Cross-Border Capital Flows in Emerging Markets : Demand-Pull or Supply-Push?


  • Kurmas Akdogan
  • Neslihan Kaya Eksi
  • Ozan Eksi


We disentangle the cross-border capital flows into demand-pull and supply-push components for four selected emerging markets : Brazil, Indonesia, Malaysia and Turkey. We employ vector autoregressions with sign restrictions method, using two variables: noncore liabilities of banks and the money market rates. Demand shocks are defined as those that move these two variables in the same direction and supply shocks as those that move them in opposite directions. Our results imply that, in the wake of the global financial crisis, worsening demand conditions in the recipient countries and the high levels of uncertainty were the main determinants of the decline in cross border flows. However, once the unconventional policy measures by the advanced economies were put into effect, the proliferation of global liquidity worked as a push factor for cross border flows.

Suggested Citation

  • Kurmas Akdogan & Neslihan Kaya Eksi & Ozan Eksi, 2016. "Cross-Border Capital Flows in Emerging Markets : Demand-Pull or Supply-Push?," Working Papers 1615, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1615

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    Financial stability; Capital flows; Non-core liabilities; Sign restrictions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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