Lim, Jamus JeromeMohapatra, SanketStocker, Marc2014-04-102014-04-102014-03https://hdl.handle.net/10986/17733This paper examines gross financial inflows to developing countries between 2000 and 2013, with a particular focus on the potential effects of quantitative easing policies in the United States and other high-income countries. The paper finds evidence for potential transmission of quantitative easing along observable liquidity, portfolio balancing, and confidence channels. Moreover, quantitative easing had an additional effect over and above these observable channels, which the paper argues cannot be attributed to either market expectations or changes in the structural relationships between inflows and observable fundamentals. The baseline estimates place the lower bound of the effect of quantitative easing at around 5 percent of gross inflows (for the average developing economy), which suggests that of the 62 percent increase in inflows during 2009-13 related to changing global monetary conditions, at least 13 percent of this was attributable to quantitative easing. The paper also finds evidence of heterogeneity among different types of flows; portfolio (especially bond) flows tend to be more sensitive than foreign direct investment to our measured effects from quantitative easing. Finally, the paper performs simulations that explore the potential effects of the withdrawal of quantitative easing on financial flows to developing countries.en-USCC BY 3.0 IGOACCOUNTINGALTERNATIVE INVESTMENTSARBITRAGESASSET CLASSESASSET PRICEASSET PURCHASEBALANCE OF PAYMENTSBALANCE OF PAYMENTS FLOWSBALANCE SHEETBALANCE SHEETSBANK ASSETBANK LENDINGBANK LOANSBASIS POINTBASIS POINTSBENCHMARKBONDBOND FLOWSBOND FUNDSBORROWING COSTSCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MOBILITYCENTRAL BANKCENTRAL BANK ASSETCENTRAL BANKSCHECKSCONTROL VARIABLESCOST OF CAPITALCOUNTRY FIXED EFFECTSCOUNTRY RISKCOVARIANCE MATRIXCREDIBILITYCREDIT DEFAULTCREDIT DEFAULT SWAPCROSS-BORDER CAPITALCUMULATIVE INFLOWSCURRENCYCURVE YIELDDEBTDEBT BURDENDEFLATIONDEPENDENT VARIABLEDEPRECIATIONSDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDEVELOPING ECONOMYDEVELOPMENT POLICYDUMMY VARIABLESECONOMETRIC MODELECONOMETRICSECONOMIC CONDITIONSECONOMIC ENVIRONMENTSECONOMIC RESEARCHELASTICITYEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSEQUITIESEQUITY FLOWSEQUITY MARKETEQUITY MARKETSEQUITY PRICESEXCHANGE RATEEXCHANGE RATE APPRECIATIONEXCHANGE RATESEXPANSIONARY MONETARY POLICYEXPLANATORY VARIABLESFEDERAL RESERVEFEDERAL RESERVE SYSTEMFINANCIAL ASSETSFINANCIAL CAPITALFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL FLOWFINANCIAL FLOWSFINANCIAL INFLOWSFINANCIAL MARKETFINANCIAL MARKETSFISCAL POLICYFIXED EFFECTFIXED INCOMEFORECASTSFOREIGN DIRECT INVESTMENTFOREIGN DIRECT INVESTORSFOREIGN EXCHANGEFOREIGN EXCHANGE RESERVESFOREIGN HOLDINGSFORWARD RATEFUTURE RESEARCHFUTURESFUTURES CONTRACTGDPGLOBAL CAPITALGLOBAL CAPITAL FLOWSGLOBAL ECONOMIC PROSPECTSGLOBAL ECONOMYGLOBAL FUNDGOVERNMENT BONDSGROWTH RATEGROWTH RATESHIGH-INCOME COUNTRIESINCOME INSTRUMENTSINDICATOR VARIABLEINDICATOR VARIABLESINFLATIONINFLATION DIFFERENTIALINFLATION DIFFERENTIALSINSTITUTIONAL INVESTORINTEREST RATEINTEREST RATE DIFFERENTIALINTEREST RATE DIFFERENTIALSINTEREST RATE SPREADINTERNATIONAL BANKINTERNATIONAL BANK LENDINGINTERNATIONAL ECONOMICSINTERNATIONAL EQUITYINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL SETTLEMENTSINVESTABLE FUNDSINVESTINGINVESTMENT ACTIVITYINVESTMENT ALTERNATIVELIQUID ASSETSLIQUIDITYLIQUIDITY PREMIUMLOANLONG BONDSLONG-TERM ASSETSLONG-TERM COSTLONG-TERM INTERESTLONG-TERM INTEREST RATELONG-TERM YIELDSM2MACROECONOMIC VARIABLESMACROECONOMICSMARKET CONDITIONSMARKET EXPECTATIONSMARKET RETURNSMONETARY CONDITIONSMONETARY FUNDMONETARY POLICIESMONETARY POLICYMONEY SUPPLYMORTGAGEMORTGAGE-BACKED SECURITIESMUTUAL FUNDSNOMINAL INTEREST RATENOMINAL INTEREST RATESOPPORTUNITY COSTOUTPUTPOLITICAL ECONOMYPOLITICAL RISKPORTFOLIOPORTFOLIO CAPITALPORTFOLIO FLOWPORTFOLIO FLOWSPORTFOLIOSPOST-CRISIS PERIODPRIVATE BANKSPRIVATE CREDITPUSH FACTORSRAPID EXPANSIONREAL EFFECTIVE EXCHANGE RATESREAL EXCHANGE RATEREAL GDPREAL INTERESTREAL INTEREST RATERETURNRETURNSRISKY ASSETSROBUSTNESS CHECKROBUSTNESS CHECKSSECONDARY MARKETSECONDARY MARKET TRANSACTIONSSECONDARY MARKETSSECURITIESSECURITIES MARKETSHORT-TERM BILLSSHORT-TERM INTEREST RATESHORT-TERM INTEREST RATESSHORT-TERM RATESSLOWDOWNSTANDARD DEVIATIONSTANDARD DEVIATIONSSTOCK PRICEST-BILLT-BILL RATETOTAL MARKETTRADE CREDITTREASURIESTREASURYTREASURY BILLTREASURY BILL RATETREASURY BILLSTREASURY NOTETREASURY YIELDSUNCERTAINTYUNDERESTIMATESVARIANCE-COVARIANCE MATRIXVOLATILITYWEAK ASSETWITHDRAWALWORLD DEVELOPMENT INDICATORSWORLD ECONOMYWORLD EQUITYWORLD EQUITY MARKETSWORLD MARKETWORLD MARKET INTEGRATIONYIELD CURVEYIELD SPREADS10.1596/1813-9450-6820