Journal article

Publication year: 2014

Pages: 101-124

Journal: Journal of International Money and Finance

Volume number: 48, Part A

Open access status: Green

DOI Link: https://doi.org/10.1016/j.jimonfin.2014.07.004

Publisher: Elsevier

Abstract: 

The present paper examines the degree of comovement of gross capital inflows, which is a highly sensitive issue for policy makers. We estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into (i) a global factor common to all types of flows and all recipient countries, (ii) a factor specific to a given type of capital inflows, (iii) a regional factor and (iv) a country-specific component. We find that the latter explains by far the largest fraction of fluctuations in capital inflows followed by regional factors, which are particularly important for emerging markets' FDI and portfolio inflows as well as bank lending to Emerging Europe. The global factor, however, explains only a small share of the overall variation. We also employ dynamic panel and time series regressions to explain the determinants of the estimated components. The global factor is shown to reflect U.S. financial conditions.

Harvard Citation style: Förster, M., Jorra, M. and Tillmann, P. (2014) The dynamics of international capital flows: Results from a dynamic hierarchical factor model, Journal of International Money and Finance, 48, Part A, pp. 101-124. https://doi.org/10.1016/j.jimonfin.2014.07.004

APA Citation style: Förster, M., Jorra, M., & Tillmann, P. (2014). The dynamics of international capital flows: Results from a dynamic hierarchical factor model. Journal of International Money and Finance. 48, Part A, 101-124. https://doi.org/10.1016/j.jimonfin.2014.07.004