The Cyclical Properties of Disaggregated Capital Flows
Federal Reserve Bank of St. Louis Working Paper No. 2008-041D
46 Pages Posted: 6 Nov 2008 Last revised: 16 Jun 2012
Date Written: July 15, 2010
Abstract
We analyze the second-moment properties of the components of international capital flows and their relationship to business cycle variables (output, investment, and real interest rate) in 22 industrial and emerging countries. Total inward flows are procyclical with respect to all three macro variables. Net outward flows are countercyclical with respect to output and investment in most industrial and emerging countries. Disaggregated inward flows positively comove with output in industrial countries and with investment and the real interest rate in the G7 economies. Inward foreign direct investment is the only non-procyclical type of inward capital flows (with respect to output) in the developing economies. Formal statistical tests based on nonparametric bootstrap techniques detect significant variance increases in all G7 countries' disaggregated capital flows over exogenous and endogenously estimated breaks.
Keywords: Capital Flows, International Business Cycles, Second Moments
JEL Classification: E32, F21, F32, F36
Suggested Citation: Suggested Citation
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