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

See all articles by Silvio Contessi

Silvio Contessi

Monash Business School - Department of Banking and Finance; Financial Research Network (FIRN)

Pierangelo De Pace

Pomona College - Department of Economics

Johanna Francis

Fordham University

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

Contessi, Silvio and De Pace, Pierangelo and Francis, Johanna, The Cyclical Properties of Disaggregated Capital Flows (July 15, 2010). Federal Reserve Bank of St. Louis Working Paper No. 2008-041D, Available at SSRN: https://ssrn.com/abstract=1295483 or http://dx.doi.org/10.2139/ssrn.1295483

Silvio Contessi (Contact Author)

Monash Business School - Department of Banking and Finance ( email )

P.O. Box 197
Caulfield East, 3145
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Pierangelo De Pace

Pomona College - Department of Economics ( email )

425 N College Avenue
Carnegie Building, Room 205
Claremont, CA 91711
United States
+19096218744 (Phone)

HOME PAGE: http://sites.google.com/site/pierangelodepace/

Johanna Francis

Fordham University ( email )

113 West 60th Street
New York, NY 10023
United States

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