Debt- and Equity-Led Capital Flow Episodes

34 Pages Posted: 18 Aug 2012 Last revised: 30 Jan 2023

See all articles by Kristin J. Forbes

Kristin J. Forbes

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Date Written: August 2012

Abstract

Forbes and Warnock (2012) identify episodes of extreme capital flow movements--surges, stops, flight, and retrenchment--and find that global factors, especially global risk, are significantly associated with extreme capital flow episodes whereas domestic macroeconomic characteristics and capital controls are less important. That analysis leads naturally to the question of which types of capital flows are driving the episodes and if debt- and equity-led episodes differ in material ways. After identifying debt- and equity-led episodes, we find that most episodes of extreme capital flow movements around the world are debt-led and the factors associated with debt-led episodes are similar to the factors behind episodes identified with aggregate capital flow data. In contrast, equity-led episodes are less frequent, more idiosyncratic, and differ in nature from other episodes.

Suggested Citation

Forbes, Kristin J. and Warnock, Francis E., Debt- and Equity-Led Capital Flow Episodes (August 2012). NBER Working Paper No. w18329, Available at SSRN: https://ssrn.com/abstract=2131699

Kristin J. Forbes (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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HOME PAGE: http://web.mit.edu/kjforbes/www

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Francis E. Warnock

University of Virginia - Darden Business School ( email )

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Charlottesville, VA 22906-6550
United States
434-924-6076 (Phone)

HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

National Bureau of Economic Research (NBER) ( email )

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