The Volatility Of Capital Flows In Emerging Markets

Author : Maria Sole Pagliari,Swarnali Ahmed Hannan
Publisher : International Monetary Fund
Page : 58 pages
File Size : 40,8 Mb
Release : 2017-03-07
Category : Business & Economics
ISBN : 9781475585254

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The Volatility of Capital Flows in Emerging Markets by Maria Sole Pagliari,Swarnali Ahmed Hannan Pdf

Capital flow volatility is a concern for macroeconomic and financial stability. Nonetheless, literature is scarce in this topic. Our paper sheds light on this issue in two dimensions. First, using quarterly data for 65 countries over the period 1970Q1-2016Q1, we construct three measures of volatility, for total capital flows and key instruments. Second, we perform panel regressions to understand the determinants of volatility. The measures show that the volatility of all instruments is prone to bouts, rising sharply during global shocks like the taper tantrum episode. Capital flow volatility thus remains a challenge for policy makers. The regression results suggest that push factors can be more important than pull factors in explaining volatility, illustrating that the characteristics of volatility can be different from those of the flows levels.

Author : Mr.R. Gelos
Publisher : International Monetary Fund
Page : 29 pages
File Size : 45,6 Mb
Release : 2011-04-01
Category : Business & Economics
ISBN : 9781455253319

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International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey by Mr.R. Gelos Pdf

Gaining a better understanding of the behavior of international investors is key for informing the debate about the optimal response to capital flows and about reforms to the international financial architecture. In this context, recent research on the behavior of international mutual funds at the micro level has expanded our knowledge about the drivers of portfolio flows and the mechanisms behind the transmission of financial shocks across countries. This paper provides a brief survey of this literature, with a focus on the empirical evidence for emerging markets. Overall, the behavior of international mutual funds is complex and overly simplistic characterizations are misleading. However, there is broad-based evidence for momentum trading among funds. Moreover, funds tend to avoid opaque markets and assets, and this behavior becomes more pronounced during volatile times. Portfolio rebalancing mechanisms are clearly important in explaining contagion patterns, even in the absence of common macroeconomic fundamentals. From a surveillance point of view, this implies that monitoring the exposures of large investors at a micro level is crucial to assess vulnerabilities.

Author : Ms.Deniz O Igan,Ali M. Kutan,Ali Mirzae
Publisher : International Monetary Fund
Page : 50 pages
File Size : 53,6 Mb
Release : 2016-12-06
Category : Business & Economics
ISBN : 9781475558562

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Real Effects of Capital Inflows in Emerging Markets by Ms.Deniz O Igan,Ali M. Kutan,Ali Mirzae Pdf

We examine the association between capital inflows and industry growth in a sample of 22 emerging market economies from 1998 to 2010. We expect more external finance dependent industries in countries that host more capital inflows to grow disproportionately faster. This is indeed the case in the pre-crisis period of 1998–2007, and is driven by debt, rather than equity, inflows. We also observe a reduction in output volatility but this association is more pronounced for equity, rather than debt, inflows. These relationships, however, break down during the crisis, hinting at the importance of an undisrupted global financial system for emerging markets to harness the growth benefits of capital inflows. In line with this observation, we also document that the inflows-growth nexus is stronger in countries with well-functioning banks.

Author : Mahmood Pradhan,Mr.Ravi Balakrishnan,Reza Baqir,Mr.Geoffrey Heenan,Sylwia Nowak,Ceyda Oner,Mr.Sanjaya Panth
Publisher : International Monetary Fund
Page : 45 pages
File Size : 47,9 Mb
Release : 2011-04-20
Category : Business & Economics
ISBN : 9781463935122

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Policy Responses to Capital Flows in Emerging Markets by Mahmood Pradhan,Mr.Ravi Balakrishnan,Reza Baqir,Mr.Geoffrey Heenan,Sylwia Nowak,Ceyda Oner,Mr.Sanjaya Panth Pdf

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Author : Mr.John C Bluedorn,Rupa Duttagupta,Mr.Jaime Guajardo,Petia Topalova
Publisher : International Monetary Fund
Page : 38 pages
File Size : 45,9 Mb
Release : 2013-08-22
Category : Business & Economics
ISBN : 9781484389041

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Capital Flows are Fickle by Mr.John C Bluedorn,Rupa Duttagupta,Mr.Jaime Guajardo,Petia Topalova Pdf

Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt.

Author : Mr.R. G Gelos,Lucyna Gornicka,Mr.Robin Koepke,Ms.Ratna Sahay,Ms.Silvia Sgherri
Publisher : International Monetary Fund
Page : 44 pages
File Size : 54,9 Mb
Release : 2019-12-20
Category : Business & Economics
ISBN : 9781513522906

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Capital Flows at Risk: Taming the Ebbs and Flows by Mr.R. G Gelos,Lucyna Gornicka,Mr.Robin Koepke,Ms.Ratna Sahay,Ms.Silvia Sgherri Pdf

The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

Author : Sebastian Edwards,Márcio G. P. Garcia
Publisher : University of Chicago Press
Page : 299 pages
File Size : 51,9 Mb
Release : 2008-09-15
Category : Business & Economics
ISBN : 9780226185040

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Financial Markets Volatility and Performance in Emerging Markets by Sebastian Edwards,Márcio G. P. Garcia Pdf

Capital mobility is a double-edged sword for emerging economies, as governments must weigh the benefits of investment against the potential economic costs and political consequences of currency crises, devaluations, and instability. Financial Markets Volatility and Performance in Emerging Markets addresses the delicate balance between capital mobility and capital controls as developing countries navigate the convoluted global network of private investors, hedge funds, large corporations, and international institutions such as the International Monetary Fund. A group of experts here examine rapidly globalizing financial markets with regard to capital flows and crises, domestic credit, international financial integration, and economic policy. Featuring detailed analyses and cross-national comparisons of countries such as Brazil, Argentina, Uruguay, and Korea, this book will shape economists’ and policymakers’ understanding of the effectiveness of restrictions on capital mobility in the world’s most fragile economies.

Author : Sebastian Edwards
Publisher : University of Chicago Press
Page : 699 pages
File Size : 52,5 Mb
Release : 2009-02-15
Category : Business & Economics
ISBN : 9780226184999

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Capital Controls and Capital Flows in Emerging Economies by Sebastian Edwards Pdf

Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. In Capital Controls and Capital Flows in Emerging Economies, an esteemed group of contributors examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.

Author : Swarnali Ahmed Hannan
Publisher : International Monetary Fund
Page : 26 pages
File Size : 47,6 Mb
Release : 2017-03-13
Category : Business & Economics
ISBN : 9781475586787

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The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis by Swarnali Ahmed Hannan Pdf

Using a sample of 34 emerging markets and developing economies over the period 2009Q3-2015Q4, the paper employs a panel framework to study the determinants of capital flows, both net and gross, across a wide range of instruments. The baseline regressions are then extended to focus on high and low episodes – quarters with flows one standard deviation above/below mean. Overall, the results suggest that the capital flow slowdown witnessed in recent years is due to a combination of lower growth prospects of recipient countries and worse global risk sentiment. However, the determinants of flows can be considerably different across instruments and across the type of flows considered, net or gross. The sensitivity of certain types of flows, towards push and pull factors, increases during periods of high and low capital flows. Moreover, some variables may not necessarily be significant during normal times, but can be important drivers during such episodes, and vice versa. Indicators like the gap between the U.S. long- and short-term maturity bond yields – not significant during normal times – can be an important driver during high episodes.

Author : Williamson, John
Publisher : Peterson Institute
Page : 160 pages
File Size : 51,8 Mb
Release : 2005
Category : Electronic
ISBN : 0881325961

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Curbing the Boom-Bust Cycle: Stabilizing Capital Flows to Emerging Markets by Williamson, John Pdf

Author : Atish R. Ghosh,Jonathan D. Ostry,Mahvash S. Qureshi
Publisher : MIT Press
Page : 489 pages
File Size : 55,9 Mb
Release : 2018-01-12
Category : Political Science
ISBN : 9780262037167

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Taming the Tide of Capital Flows by Atish R. Ghosh,Jonathan D. Ostry,Mahvash S. Qureshi Pdf

A comprehensive examination of policy measures intended to help emerging markets contend with large and volatile capital flows. 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 authors, all IMF experts, explain 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 authors combine theoretical and empirical analysis to consider the interaction between monetary, exchange rate, macroprudential, and capital control policies to mitigate these risks. They examine 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.

Author : Mr.Eugenio Cerutti,Mr.Stijn Claessens,Mr.Damien Puy
Publisher : International Monetary Fund
Page : 43 pages
File Size : 47,6 Mb
Release : 2015-06-22
Category : Business & Economics
ISBN : 9781513526638

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Push Factors and Capital Flows to Emerging Markets by Mr.Eugenio Cerutti,Mr.Stijn Claessens,Mr.Damien Puy Pdf

This paper analyzes the behavior of gross capital inflows across 34 emerging markets (EMs). We first confirm that aggregate inflows to EMs co-move considerably. We then report three findings: (i) the aggregate co-movement conceals significant heterogeneity across asset types as only bank-related and portfolio bond and equity inflows do co-move; (ii) while global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow; and (iii) the sensitivity to common dynamics varies significantly across borrower countries, with market structure characteristics (especially the composition of the foreign investor base and the level of liquidity) rather than borrower country’s institutional fundamentals strongly affecting sensitivities. Countries relying more on international funds and global banks are found to be more sensitive to push factors. Our findings suggest that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors.

Author : Gaston Gelos,Lucyna Gornicka,Robin Koepke,Ratna Sahay,Silvia Sgherri
Publisher : Unknown
Page : 46 pages
File Size : 49,8 Mb
Release : 2021
Category : Capital movements
ISBN : OCLC:1240172048

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Capital Flows at Risk by Gaston Gelos,Lucyna Gornicka,Robin Koepke,Ratna Sahay,Silvia Sgherri Pdf

The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on changes in global financial conditions, domestic structural characteristics, and policies. The approach allows us to differentiate between short- and medium-term effects. We find that FX- and macroprudential interventions are effective in mitigating downside risks to portfolio flows stemming from adverse global shocks, while tightening of capital controls in response appears to be counterproductive. Good institutional frameworks are not able to shield countries from the increased volatility of portfolio flows in the immediate aftermath of global shocks. However, they do contribute to a more rapid bounce-back of foreign flows over the medium term.

Author : Ms.Ratna Sahay,Mr.Vivek B. Arora,Mr.Athanasios V Arvanitis,Mr.Hamid Faruqee,Mr.Papa N'Diaye,Mr.Tommaso Mancini Griffoli
Publisher : International Monetary Fund
Page : 29 pages
File Size : 54,6 Mb
Release : 2014-10-02
Category : Business & Economics
ISBN : 9781484356005

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Emerging Market Volatility by Ms.Ratna Sahay,Mr.Vivek B. Arora,Mr.Athanasios V Arvanitis,Mr.Hamid Faruqee,Mr.Papa N'Diaye,Mr.Tommaso Mancini Griffoli Pdf

Accommodative monetary policies in advanced economies have spurred increased capital inflows into emerging markets since the global financial crisis. Starting in May 2013, when the Federal Reserve publicly discussed its plans for tapering unconventional monetary policies, these emerging markets have experienced financial turbulence at the same that their domestic economic activity has slowed. This paper examines their experiences and policy responses and draws broad policy lessons. For emerging markets, good macroeconomic fundamentals matter, and early and decisive measures to strengthen macroeconomic policies and reduce vulnerabilities help dampen market reactions to external shocks. For advanced economies, clear and effective communication about the exit from unconventional monetary policy can and did help later to reduce the risk of excessive market volatility. And for the global community, enhanced global cooperation, including a strong global financial safety net, offers emerging markets effective protection against excessive volatility.

Author : Nasha Ananchotikul,Ms.Longmei Zhang
Publisher : International Monetary Fund
Page : 33 pages
File Size : 50,5 Mb
Release : 2014-08-19
Category : Business & Economics
ISBN : 9781498355285

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Portfolio Flows, Global Risk Aversion and Asset Prices in Emerging Markets by Nasha Ananchotikul,Ms.Longmei Zhang Pdf

In recent years, portfolio flows to emerging markets have become increasingly large and volatile. Using weekly portfolio fund flows data, the paper finds that their short-run dynamics are driven mostly by global “push” factors. To what extent do these cross-border flows and global risk aversion drive asset volatility in emerging markets? We use a Dynamic Conditional Correlation (DCC) Multivariate GARCH framework to estimate the impact of portfolio flows and the VIX index on three asset prices, namely equity returns, bond yields and exchange rates, in 17 emerging economies. The analysis shows that global risk aversion has a significant impact on the volatility of asset prices, while the magnitude of that impact correlates with country characteristics, including financial openness, the exchange rate regime, as well as macroeconomic fundamentals such as inflation and the current account balance. In line with earlier literature, portfolio flows to emerging markets are also found to affect the level of asset prices, as was the case in particular during the global financial crisis.