scholarly journals Capital Flows: Expansionary or Contractionary?

2016 ◽  
Vol 106 (5) ◽  
pp. 565-569 ◽  
Author(s):  
Olivier Blanchard ◽  
Jonathan D. Ostry ◽  
Atish R. Ghosh ◽  
Marcos Chamon
Keyword(s):  
Open Economy ◽  
Capital Flows ◽  
Financial Intermediation ◽  
Emerging Market ◽  
Capital Inflows ◽  
Policy Makers ◽  
Market Policy ◽  
Credit Booms ◽  
Macro Model ◽  
Net Exports

The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers, however, believe that inflows lead to credit booms and rising output; the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, stimulating financial intermediation and, potentially, output as well. We explore the implications, and find support for the key predictions in the data.

scholarly journals Capital Flows and Bank Risk-Taking Behavior: Evidence From Indonesia

2020 ◽  
Vol 9 (s1) ◽  
pp. 33-53
Author(s):  
Bayront Yudit Rumondor ◽  
Pakasa Bary
Keyword(s):  
Risk Taking ◽  
Capital Flows ◽  
Emerging Market ◽  
Capital Inflows ◽  
Bank Risk ◽  
Portfolio Investment ◽  
Industry Level ◽  
Country Level ◽  
Risk Taking Behavior ◽  
The Impact

AbstractThis paper investigates the impact of capital flows on bank risk-taking behavior. It undertakes two levels of empirical estimations, namely (i) single-country industry-level; and (ii) multi-country industry-level estimations, covering emerging market economies. The results suggest that capital inflows, in the form of portfolio investment, is significant in raising risk-taking behavior. Large banks are less aggressive in their risk-taking behavior vis-à-vis smaller banks. Such impact of portfolio investment on risk-taking behavior is also shown in the multi-country level estimates.

scholarly journals Global Economy and Turkey: 2016 and Beyond

2016 ◽  
Author(s):  
Durmuş Yılmaz
Keyword(s):  
Open Economy ◽  
Capital Flows ◽  
Global Economy ◽  
Emerging Market ◽  
Commodity Prices ◽  
High Growth ◽  
International Standards ◽  
Business Community ◽  
Structural Problems ◽  
Industrial Sectors

Irrespective of whether advanced economies (AEs) or emerging market economies (EMEs), the number one problem of the global economy is not being able to generate a satisfactory growth. Income levels is in some countries are barely above the per-crisis level. Despite ample liquidity due to quantitative monetary policies, consumption and investment demands are weak. Because high level of indebtedness deter economic agents from using credit. Credit markets still do not function well either. Quantitative easing policies have been successful in containing further deterioration. Despite ample liquidity inflation has not risen, but it did delivered the expected growth. Because banking system in AEs is weak and monetary transmission mechanisms are not functioning well. As for EMEs, commodity prices and World trade appears to be weak; economic growth are slowing down, capex is visibly falling in heavy industrial sectors due to already existing excess capacity. The academia as well as the business community are worried about the appropriateness of the present policies in case another recession comes, central banks will have little ammunition to deal with it. The option being talked of now is what is dubbed as “helicopter Money”. Turkey being an open economy, has been and will be effected by the developments in the global economy through trade, capital flows and expectation channels. By international standards, Turkey have a reasonable growth rate of 3 to 4 %, implying a new growth era where high growth cycle ended due to changing global financial conditions and its structural problems. Future growth performance will depend on the level of investments and savings to finance it. As her own saving is low, foreign capital flows is crucial. High inflation and interest rate are the two negatives, but it has a strong fiscal position, debt / GDP is 32.3%, the budget is almost balanced, producing primary surplus which proved it is resilience in the face of recent failed coup and the negative attitudes displayed by the rating agencies.

Push vs.  Pull Factors of Capital Flows Revisited: A Cross-country Analysis

2019 ◽  
Vol 18 (1) ◽  
pp. 39-60 ◽  
Author(s):  
Tae Soo Kang ◽  
Kyunghun Kim
Keyword(s):  
Interest Rates ◽  
Capital Flows ◽  
Emerging Market ◽  
Capital Inflows ◽  
Pull Factors ◽  
Empirical Examination ◽  
Advanced Economies ◽  
Alternative Measures ◽  
Country Analysis ◽  
Push And Pull

This paper examines the major determinants of net capital inflows. To account for meaningful differences in responses, 47 countries used for the empirical analysis are divided into advanced economies (AEs) and emerging market economies (EMEs). These countries are further divided into subgroups to consider the heterogeneous determinants for AEs and EMEs. Our empirical examination reveals notable heterogeneity across country groups. Both push and pull factors are statistically significant in AEs, but push factors play a larger role for EMEs, though pull factor influence is observed in a few EME subgroups. Our empirical findings are robust to alternative model specifications, alternative measures of capital flows and interest rates, as well as the use of an alternative sample period.

scholarly journals ESTIMATING CAPITAL FLOWS TO EMERGING MARKET ECONOMIES WITH HETEROGENEOUS PANELS

2017 ◽  
Vol 23 (5) ◽  
pp. 2068-2088
Author(s):  
Marco Hernandez-Vega
Keyword(s):  
Emerging Economies ◽  
Capital Flows ◽  
Fixed Effects ◽  
Emerging Market ◽  
Current Data ◽  
Capital Inflows ◽  
Fixed Effects Model ◽  
Macroeconomic Information ◽  
Gross Capital Flows ◽  
Better Than

Current data provide macroeconomic information for a large number of countries and for long periods of time (macropanels). In such panels, slope heterogeneity and cross-section dependence (CSD) are the rule rather than the exception, leading the fixed effects slope estimators to be biased and inconsistent. This paper analyzes gross capital flows to emerging economies employing the Augmented Mean Group (AMG) model to account for slope heterogeneity and CSD. The results suggest that the AMG performs better than the fixed effects model and that not only country heterogeneity is important to analyze capital inflows to emerging economies, but also are the differences among the types of capital inflows.

scholarly journals Money, the Stock Market and the Macroeconomy: A Theoretical Analysis

2013 ◽  
Vol 52 (3) ◽  
pp. 235-246
Author(s):  
Rilina Basu ◽  
Ranjanendra Narayan Nag
Keyword(s):  
Stock Market ◽  
Open Economy ◽  
Emerging Market ◽  
Equity Markets ◽  
Market Valuation ◽  
Policy Makers ◽  
Exogenous Shocks ◽  
Long Run ◽  
Short Run ◽  
Stock Market Valuation

The finance-growth nexus has become a significant issue in recent macroeconomic modelling and the centre of attention of policy makers. Over the past few decades equity markets have experienced phenomenal growth which has proved to be a major determinant of capital flow to emerging market economies. Naturally, one wants to know how development of equity markets influences the real sector and produces macroeconomic outcomes. In this paper we construct an open economy, structuralist model to examine the short-run and long- run effects of both policy-induced and exogenous shocks on output, the dynamics of stock market valuation and adjustment in monetary base. The model shows that devaluation or capital inflow will boost the economy, while fiscal expansion has deleterious consequences for stock market valuation and investment. JEL Classifications: G01, G12, F32, F36 Keywords: Tobin’s q, Effective Demand, Devaluation

scholarly journals ASSET PRICE SHOCK RESPONSE TO SHOCK CAPITAL FLOW, EXCHANGE RATE AND INTEREST RATE: CASE STUDY OF 16 EMERGING MARKET COUNTRIES

2017 ◽  
Vol 1 (2) ◽  
pp. 14
Author(s):  
Rachman Guswardi
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Capital Flows ◽  
Asset Prices ◽  
Emerging Market ◽  
Capital Inflows ◽  
Emerging Market Countries ◽  
The Exchange Rate ◽  
Positive Shock

Capital flows to developing countries and emerging markets in the world is constantly increasing. However, the crisis that occurred in 2008 and 2011 caused concern for investors. A series of policies have been carried out in several emerging market countries to take steps prudence in controlling capital flows. This study aimed to analyze the response of asset prices to the shock caused by capital inflows, interest rates and exchange rates and analyzes the contribution of shock in capital inflows, interest rates and exchange rates on asset prices in 16 emerging market countries (India, Brazil, Russia, Indonesia, Republic of South Africa, Mexico, Thailand, South Korea, Colombia, Philippines, Egypt, Hong Kong, Peru, Czech, Bangladesh, Hungary) in the year 2001-2015. The method used is quantitative method using Panel Vector Auto Regression models. The results of this study show that the first shock of positive capital inflows will affect asset prices, both that a positive shock on interest rates will affect asset prices, the third that the positive shock of the exchange rate would affect asset prices. The variables that have the biggest contribution in influencing asset prices is the exchange rate which further interest rates and the smallest is the capital inflows.

scholarly journals De-Leveraging and Mitigating Pro-Cyclicality of Capital Flows in Emerging Market Economies: Role of Macro-Prudential Policies

2013 ◽  
Author(s):  
Tolga Dağlaroğlu ◽  
Baki Demirel ◽  
Serdar Varlık
Keyword(s):  
Interest Rates ◽  
Capital Flows ◽  
Foreign Currency ◽  
Emerging Market ◽  
Capital Inflows ◽  
Emerging Market Economies ◽  
Strongly Correlated ◽  
International Capital ◽  
Market Economies

International capital flows have been on an unprecedented roller-coaster ride in recent years. Capital flows to emerging market economies have been strongly correlated with changes in global financing conditions, rising sharply during periods with relatively low global interest rates and low VIX (called risk-on) and shrinking afterward. In open emerging market economies, interest rate increases can attract excessive capital inflows appreciating the exchange rate, and leading to excessive borrowing in foreign currency, and encouraging leverage. A well-designed macro prudential policy prevents credit –driven bubble and mitigating pro-cyclicality of capital flows.

scholarly journals The Impact of International Capital Flows on Central and Eastern European Countries’ Investments, Savings, Consumption, and Current Accounts

2020 ◽  
Vol 31 (4) ◽  
pp. 450-460
Author(s):  
Laura Vilutiene ◽  
Daiva Dumciuviene
Keyword(s):  
Capital Flows ◽  
Emerging Market ◽  
Developed Countries ◽  
International Capital Flows ◽  
Capital Inflows ◽  
Eastern European ◽  
International Capital ◽  
Domestic Savings ◽  
National Economies ◽  
The Impact

Capital flows have been analysed from various perspectives and yet no consensus has been reached about the impact of international capital flows on national economies. The main aim of this paper is to present the theoretical aspects of the effect of international capital flows on national economies, and to analyse the impact of international capital flows on Central and Eastern European (CEE) countries’ domestic savings, investments, consumption, and current accounts. During the investigation, the latest studies on international capital flows were reviewed and systemised, 11 CEE countries’ main indicators from across a 10-years period were collected, and computed coefficients, which represent the change associated with a variation in clusters’ capital inflows, equal to 1 percent change of GDP, were analysed. The analyses conducted show that capital flows have an impact on countries’ economies. The main findings are:  first, domestic savings and consumption are seen to have been more strongly associated with capital inflows than investments in developed countries. Second, the relationship between investments, domestic savings, consumption and one inflow in portfolio flows would be negative, in both highly developed countries and emerging market countries. Third, where positive inflows in net and gross capital are concerned, foreign direct investments would have an insignificant positive impact on current accounts in highly developed countries and developed countries but a negative impact in emerging market countries. By achieving economic growth dynamics within a specific country, a wide evaluation of a country’s capital flows can be performed, and control of capital flows gained, by applying different assessment models.

scholarly journals Capital flows to emerging economies during and after the global financial crisis in 2008

2013 ◽  
Vol 3 (1) ◽  
pp. 71
Author(s):  
Dr.Sc. Vesna Georgieva Svrtinov ◽  
Dr.Sc. Riste Temjanovski
Keyword(s):  
Financial Crisis ◽  
Emerging Economies ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Regional Distribution ◽  
Capital Inflows ◽  
International Capital ◽  
Policy Responses ◽  
The Global Financial Crisis

This paper analyses dynamics of various types of capital flows to emerging economies during and after the global financial crisis. The first part discusses dynamics of various types of international capital flows during the global financial crisis. The second part focuses on the regional distribution of capital inflows to emerging markets economies. The third part raises the issue of the changed pattern of foreign direct investment, observed during and after the global crisis. The fourth part discusses possible policy responses for dealing with volatile capital flows to emerging market economies.

Taming the Tide of Capital Flows

2018 ◽  
Author(s):  
Atish R. Ghosh ◽  
Jonathan D. Ostry ◽  
Mahvash S. Qureshi
Keyword(s):  
Emerging Markets ◽  
Capital Flows ◽  
Financial Stability ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Capital Inflow ◽  
Capital Inflows ◽  
Comprehensive Treatment ◽  
Policy Tools

While always episodic in nature, capital flows to emerging market economies have been especially volatile since the global financial crisis. After peaking at $680 billion in 2007, flows to emerging markets turned negative at the onset of crisis in 2008, then rebounded only to recede again during the U.S. sovereign debt downgrade in 2011. Since then, flows have continued to swing wildly, leaving emerging market policy makers wondering whether they can put in place policies during the inflow phase that will soften the blow when flows subsequently recede. This book offers the first comprehensive treatment of policy measures intended to help emerging markets contend with large and volatile capital flows. The book explains that, in the spirit of liberalization and deregulation in the 1980s and 1990s, many emerging market governments eliminated capital inflow controls along with outflow controls. By 2012, however, capital inflow controls were again acknowledged as legitimate policy tools. Focusing on the macroeconomic and financial-stability risks associated with capital flows, the book combines theoretical and empirical analysis to consider the interaction between monetary, exchange rate, macroprudential, and capital control policies to mitigate these risks. It examines the effectiveness of various policy tools, discuss the practical considerations and multilateral implications of their use, and provide concrete policy advice for dealing with capital inflows.

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