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What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature

45 Pages Posted: 26 Feb 2015 Last revised: 29 Dec 2016

Robin Koepke

International Monetary Fund

Date Written: April 23, 2015

Abstract

This paper reviews the rapidly growing empirical literature on the drivers of capital flows to emerging markets. The empirical evidence is structured based on the recognition that the drivers of capital flows vary over time and across different types of capital flows. The drivers are classified using the traditional “push vs. pull” framework, which is augmented by a distinction between cyclical and structural factors. Push factors are found to matter most for portfolio flows, somewhat less for banking flows, and least for FDI. Pull factors matter for all three components, but most for banking flows. A historical perspective suggests that the recent literature may have overemphasized the importance of cyclical factors at the expense of longer-term structural trends.

Keywords: Determinants of EM Capital Flows, Push and Pull, FDI, Portfolio Flows, Bank Lending

JEL Classification: F21, F32, F34, F41, F42, G1

Suggested Citation

Koepke, Robin, What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature (April 23, 2015). Available at SSRN: https://ssrn.com/abstract=2569249 or http://dx.doi.org/10.2139/ssrn.2569249

Robin Koepke (Contact Author)

International Monetary Fund ( email )

United States

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