Capital Flows are Fickle: Anytime, Anywhere

38 Pages Posted: 11 Sep 2013

See all articles by John C. Bluedorn

John C. Bluedorn

International Monetary Fund (IMF) - Research Department

Rupa Duttagupta

International Monetary Fund (IMF)

Jaime Guajardo

International Monetary Fund (IMF)

Petia B. Topalova

International Monetary Fund (IMF)

Date Written: August 2013

Abstract

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.

Keywords: Capital flows, Globalization, Developed countries, Developing countries, Cross country analysis, international capital flows, volatility, persistence, comovement, global factors, net capital flows, capital inflows, private capital flows, risk aversion, volatility of capital flows, capital outflows, private flows, capital movements, capital mobility, management of capital flows, composition of capital inflows, border capital flows, current account balance, capital flow volatility, measures of volatility, flows of debt, government bonds, current account deficit, capital flow reversals, short-term capital, moral hazard

JEL Classification: F32, F21, O16

Suggested Citation

Bluedorn, John C. and Duttagupta, Rupa and Guajardo, Jaime and Topalova, Petia B., Capital Flows are Fickle: Anytime, Anywhere (August 2013). IMF Working Paper No. 13/183. Available at SSRN: https://ssrn.com/abstract=2324178

John C. Bluedorn (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rupa Duttagupta

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8583 (Phone)
202-589-8583 (Fax)

Jaime Guajardo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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