Capital Flows-at-Risk: Push, Pull and the Role of Policy

46 Pages Posted: 19 Aug 2020

See all articles by Fernando Eguren Martin

Fernando Eguren Martin

Bank of England

Cian O'Neill

Bank of England

Andrej Sokol

European Central Bank (ECB)

Lukas von dem Berge

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: August 07, 2020

Abstract

We characterise the probability distribution of capital flows for a panel of emerging market economies conditional on information contained in financial asset prices, with a focus on ‘tail’ events. Our framework, based on the quantile regression methodology, allows for a separate role of push and pull-type factors, and offers insights into the term-structure of these effects. We find that both push and pull factors have heterogeneous effects across the distribution of capital flows, with the strongest reactions in the left tail. Also, the effect of changes in pull factors is more persistent than that of push factors. Finally, we explore the role of policy, and find that macroprudential and capital flow management measures are associated with changes in the distribution of capital flows.

Keywords: Capital flows, sudden stops, capital flight, retrenchment, capital flow surges, push versus pull, capital controls, macroprudential policy, financial conditions indices, quantile regression

JEL Classification: F32, F34, G15

Suggested Citation

Eguren Martin, Fernando and O'Neill, Cian and Sokol, Andrej and von dem Berge, Lukas, Capital Flows-at-Risk: Push, Pull and the Role of Policy (August 07, 2020). Bank of England Working Paper No. 881, Available at SSRN: https://ssrn.com/abstract=3638328 or http://dx.doi.org/10.2139/ssrn.3638328

Fernando Eguren Martin (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Cian O'Neill

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andrej Sokol

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Lukas Von dem Berge

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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