Working Paper: NBER ID: w23116
Authors: Stefan Avdjiev; Bryan Hardy; Sebnem Kalemli-Ozcan; Luis Serven
Abstract: We construct a new quarterly data set of international capital flows broken down by sector: banks, corporates and sovereigns. Using our novel data set, we establish several key facts that demonstrate the importance of distinguishing in- and outflows by the domestic sectoral identity. We find that public sector flows may serve as a countervailing force to private sector flows, especially in emerging markets (EMs), as these flows respond differently not only to country-specific fundamentals but also to global shocks. The high inflow-outflow correlation observed in total capital flow data is driven by within-sector flows, especially those of AE banks. In general, inflows and outflows of AEs and inflows to EMs are primarily AE banks’ transactions, and, as a consequence, respond similarly to capital flow drivers. By contrast, EM outflows respond differently to global shocks and changes in fundamentals, leading to lower inflow-outflows correlations for EMs.
Keywords: capital flows; banks; corporates; sovereigns; emerging markets
JEL Codes: F00; F21; F32; F41; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VIX index (G12) | capital inflows (F21) |
| country-specific GDP growth (O57) | capital inflows (F21) |
| public sector flows (F32) | private sector flows (O16) |
| public sector inflows (H59) | response to global shocks (F69) |
| private sector inflows (F21) | response to global shocks (F69) |
| within-sector flows (F29) | capital inflows and outflows (F21) |