Does the Relative Importance of Push and Pull Factors of Foreign Capital Flows Vary Across Quantiles?

42 Pages Posted: 21 May 2020 Last revised: 20 Jul 2021

See all articles by Xichen Wang

Xichen Wang

Chongqing Technology and Business University

Cheng Yan

University of Essex - Essex Business School

Date Written: April 24, 2020

Abstract

We empirically gauge the relative importance of global and domestic determinants of foreign flows to 51 Emerging Markets across quantiles. We propose a quantile regression dynamic panel model with fixed effects, to reconcile mixed results in the literature. We find that push factors are associated with the occurrence of extreme movements, and pull factors are significantly related to the magnitude of surges/stops. During stress episodes of low foreign inflows, we find strong evidence of investor differentiation among emerging economies according to their fundamentals. Such results call for monitoring capital flows’ sustainability and building strong fundamentals.

Keywords: Foreign flows; Emerging market; Surge; Sudden stop; Global financial cycle

JEL Classification: E44; F21; F32; G1

Suggested Citation

Wang, Xichen and Yan, Cheng, Does the Relative Importance of Push and Pull Factors of Foreign Capital Flows Vary Across Quantiles? (April 24, 2020). Available at SSRN: https://ssrn.com/abstract=3584482 or http://dx.doi.org/10.2139/ssrn.3584482

Xichen Wang

Chongqing Technology and Business University ( email )

Chongqing, Nan'an 400067
China

Cheng Yan (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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