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Debt- and Equity-Led Capital Flow Episodes

34 Pages Posted: 18 Aug 2012 Last revised: 27 Aug 2012

Kristin J. Forbes

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Bank of England - Monetary Policy Committee

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 )

Room E62-416
Cambridge, MA 02142
United States
617-253-8996 (Phone)

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bank of England - Monetary Policy Committee ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Francis E. Warnock

University of Virginia - Darden Business School ( email )

P.O. Box 6550
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 )

1050 Massachusetts Avenue
Cambridge, MA 02138-5398

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