Publication: Are Capital Flows Fickle? Increasingly? And Does the Answer Still Depend on Type?
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2018-02-22
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2018-04-10
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According to conventional wisdom, capital flows are fickle. Focusing on emerging markets, we ask whether this conventional wisdom still holds in our contemporary world. Our results show that, despite recent structural and regulatory changes, much of it survives. Foreign direct investment (FDI) inflows are more stable than non-FDI inflows. Within non-FDI inflows, portfolio debt and bank-intermediated flows remain the most volatile. Whereas FDI inflows are driven mainly by pull factors, portfolio debt and equity are driven mainly by push factors; bank-intermediated flows are driven a combination of push and pull factors. Capital outflows from emerging markets behave differently, however. FDI outflows from emerging markets have grown and become significantly more volatile. There is similarly an increase in the volatility of bank-intermediated capital outflows from emerging markets. Our findings underscore that outflows from emerging markets, both FDI and bank-related flows, have come to play a growing role and warrant greater attention from analysts and policymakers.
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Publication Are Capital Flows Fickle? Increasingly? And Does the Answer Still Depend on Type?(World Bank, Washington, DC, 2017-02)According to conventional wisdom, capital flows are fickle. Focusing on emerging markets, this paper asks whether this conventional wisdom still holds in the contemporary world. The results show that, despite recent structural and regulatory changes, much of it survives. FDI inflows are more stable than non-FDI inflows. Within non-FDI inflows, portfolio debt and bank-intermediated flows remain the most volatile. While FDI inflows are driven mainly by pull factors, portfolio debt and equity are driven mainly by push factors; and bank-intermediated flows are driven by a combination of push and pull factors. But capital outflows from emerging markets behave differently. FDI outflows from emerging markets have grown and become significantly more volatile. 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