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

25 Pages Posted: 12 Mar 2019

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Date Written: April 2019

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 distinction between ‘push’ and ‘pull’ drivers, which continues to serve as a useful framework. Push factors like global risk aversion and external interest rates are found to matter most for portfolio debt and equity flows, but somewhat less for banking flows. Pull factors such as domestic output growth, asset returns and country risk matter for all three capital flows components, but most for banking flows.

Keywords: Bank lending, Determinants of EM capital flows, Portfolio flows, Push and pull

Suggested Citation

Koepke, Robin, What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature (April 2019). Journal of Economic Surveys, Vol. 33, Issue 2, pp. 516-540, 2019. Available at SSRN: https://ssrn.com/abstract=3349324 or http://dx.doi.org/10.1111/joes.12273

Robin Koepke (Contact Author)

International Monetary Fund ( email )

United States

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