IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Ride the wild surf : an investigation of the drivers of surges in capital inflows

  • Calderon, Cesar
  • Kubota, Megumi

Over the past 15 years, gross inflows to industrial and developing countries have enjoyed a wild ride. After reaching record highs in the run-up to the global financial crisis, they collapsed dramatically in 2008-09. As signs of global recovery reappeared, capital inflows resumed although at different speeds. The recovery in flows was faster and sharper in developing countries. This paper aims at understanding the (domestic and external) drivers of these surges in gross inflows using quarterly data for 67 countries from 1975 to 2010. It finds that domestic and external factors have significant explanatory power in driving surges of inflows. This finding holds for the sample of industrial countries whereas domestic factors play a significantly larger role in explaining surges to developing countries. Zooming into the findings shows that: (a) financial booms tend to attract massive capital inflows, (b) surges to either industrial or developing countries are driven by regional contagion, and (c) strong growth and natural resource abundance are keys to attract inflows of foreign capital into developing countries.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6753.

in new window

Date of creation: 01 Jan 2014
Date of revision:
Handle: RePEc:wbk:wbrwps:6753
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Marcel Fratzscher, 2011. "Capital Flows, Push versus Pull Factors and the Global Financial Crisis," NBER Chapters, in: Global Financial Crisis National Bureau of Economic Research, Inc.
  2. Reinhart, Carmen & Kaminsky, Graciela, 2000. "Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
    [The twin crises: Te causes of banking and balance of payments problems]
    ," MPRA Paper 13842, University Library of Munich, Germany.
  3. Kevin Cowan & Jose De Gregorio & Alejandro Micco & Christopher Neilson, 2007. "Financial Diversification, Sudden Stops and Sudden Starts," Working Papers Central Bank of Chile 423, Central Bank of Chile.
  4. Ross Levine, 2005. "Law, Endowments, and Property Rights," NBER Working Papers 11502, National Bureau of Economic Research, Inc.
  5. Marco Terrones & M. Ayhan Kose & Stijn Claessens, 2011. "How Do Business and Financial Cycles Interact?," IMF Working Papers 11/88, International Monetary Fund.
  6. Leonor Keller & Ibrahim Chowdhury, 2012. "Managing Large-Scale Capital Inflows: The Case of the Czech Republic, Poland and Romania," IMF Working Papers 12/138, International Monetary Fund.
  7. Maurice Obstfeld, 2012. "Does the Current Account Still Matter?," American Economic Review, American Economic Association, vol. 102(3), pages 1-23, May.
  8. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  9. Valentina Bruno & Hyun Song Shin, 2013. "Capital Flows, Cross-Border Banking and Global Liquidity," NBER Working Papers 19038, National Bureau of Economic Research, Inc.
  10. Broner, Fernando A & Didier, Tatiana & Erce, Aitor & Schmukler, Sergio, 2011. "Gross Capital Flows: Dynamics and Crises," CEPR Discussion Papers 8591, C.E.P.R. Discussion Papers.
  11. Sula, Ozan, 2006. "Surges and Sudden Stops of Capital Flows to Emerging Markets," MPRA Paper 383, University Library of Munich, Germany.
  12. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  13. Gian-Maria Milesi-Ferretti & Cédric Tille, 2010. "The Great Retrenchment: International Capital Flows During the Global Financial Crisis," IHEID Working Papers 18-2010, Economics Section, The Graduate Institute of International Studies, revised 15 Sep 2010.
  14. Manuel Agosin & Franklin Huaita, 2009. "Overreaction in capital flows to emerging markets: Booms and sudden stops," Working Papers wp295, University of Chile, Department of Economics.
  15. Manuel R. Agosin & Franklin Huaita, 2011. "Capital flows to emerging economies: Minsky in the tropics," Cambridge Journal of Economics, Oxford University Press, vol. 35(4), pages 663-683.
  16. repec:oup:qjecon:v:119:y:2004:i:1:p:1-48 is not listed on IDEAS
  17. Kristin J. Forbes & Francis E. Warnock, 2011. "Capital Flow Waves: Surges, Stops, Flight, and Retrenchment," NBER Working Papers 17351, National Bureau of Economic Research, Inc.
  18. Carmen M. Reinhart & Vincent R. Reinhart, 2008. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER Working Papers 14321, National Bureau of Economic Research, Inc.
  19. Gourinchas, Pierre-Olivier & Obstfeld, Maurice, 2011. "Stories of the Twentieth Century for the Twenty-First," CEPR Discussion Papers 8518, C.E.P.R. Discussion Papers.
  20. Enrique Mendoza & Marco Terrones, 2012. "An Anatomy of Credit Booms and their Demise," Working Papers Central Bank of Chile 670, Central Bank of Chile.
  21. Calderon, Cesar & Kubota, Megumi, 2012. "Gross inflows gone wild : gross capital inflows, credit booms and crises," Policy Research Working Paper Series 6270, The World Bank.
  22. Calderon, Cesar & Kubota, Megumi, 2011. "Sudden stops : are global and local investors alike ?," Policy Research Working Paper Series 5569, The World Bank.
  23. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
  24. Joshua Aizenman & Vladyslav Sushko, 2011. "Capital Flow Types, External Financing Needs, and Industrial Growth: 99 countries, 1991-2007," NBER Working Papers 17228, National Bureau of Economic Research, Inc.
  25. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6753. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.