Capital Flows, Push versus Pull Factors and the Global Financial Crisis

By Marcel Fratzscher. Social Science Research Network, 2012

885 citations recorded by the source corpus.

The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks – key crisis events as well as changes to global liquidity and risk – have exerted a large effect on capital flows both in the crisis and in the recovery. However, these effects have been highly heterogeneous across countries, with a large part of this heterogeneity being explained by differences in the quality of domestic institutions, country risk and the strength of domestic macroeconomic fundamentals. Comparing and quantifying these effects show that common factors (“push” factors) were overall the main drivers of capital flows during the crisis, while country-specific determinants (“pull” factors) have been dominant in accounting for the dynamics of global capital flows in 2009 and 2010, in particular for emerging markets.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/59f8b36f6fc0de517afd352d86381c9469bd6140

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Citations in the corpus

How Important is the Global Financial Cycle? Evidence from Capital Flows (2017, background): “Fratzscher, M (2012): “Capital flows, push versus pull factors and the global financial crisis”, Journal of International Economics, 88, pp 341–56. Ghosh, A, M Qureshi, J I Kim and J Zalduendo (2014): “Surges”, Journal of International Economics, 92, pp 266–85. Han, X and S-J Wei (2016): “Internatio”
Bubble Thy Neighbor: Portfolio Effects and Externalities from Capital Controls (2012, neutral): “19 The only other papers of which we are aware that use this data are: Fratzscher (2012b), Raddatz and Schmukler (2012), and Jotikasthira et al. (2010).”
Interconnectedness in the global financial market (2017, neutral): “See, for example, Fratzscher (2012) for an analysis of the 2008 crisis and Kaminsky and Reinhart (2000) for an analysis of crises in the 1990s.”
U.S. Monetary Policy and International Risk Spillovers (2019, background): “…literature on push factors in general focused on net flows and interest rate differentials with the U.S. Recently, Forbes and Warnock (2012) and Fratzscher (2012) studied total gross flows (the sum of private and sovereign flows) and show the importance of global risk factors for capital flows…”
Measuring Geopolitical Risk (2018, background): “31 Fratzscher (2012) finds evidence of dynamics of capital flows driven by safe-heaven flows during the crisis.”
On the global financial market integration “swoosh” and the trilemma (2019, neutral): “Several studies have suggested that equity return comovements increase with financial and economic integration (see e.g. Mendoza and Quadrini (2010), Brière, Chapelle, and Szafarz (2012), Fratzscher (2012)).”
On the International Spillovers of US Quantitative Easing (2018, positive): “…for most countries, but importantly, it is a fairly representative sample as shown by Jotikasthira, Lundblad and Ramadorai (2010), Miao and Pant (2012) and Fratzscher (2012), with EPFR portfolio flows and portfolio flows stemming from total balance-of-payments data mostly matching quite closely13.”
U.S. Monetary Policy and the Global Financial Cycle (2020, positive): “Fratzscher (2012) and Forbes and Warnock (2012) have extended these findings significantly.”
U.S. monetary policy and emerging market credit cycles (2017, neutral): “…sensitivity of emerging market economies to the transmission of U.S. monetary policy, this paper expands work by Forbes and Warnock (2012), Fratzscher (2012), and Ahmed and Zlate (2014) that has highlighted the importance of U.S. economic conditions, in particular U.S. monetary policy,…”
Federal Reserve Policy in an International Context (2017, background): “…exists in the financial sensitivity of countries to policy actions at the “center,” a conclusion confirmed by a large and growing literature (Fratzscher, 2012; Ahmed and Zlate, 2014; Bowman, Londono, and Sapriza, 2014; Mishra and others, 2014; Ahmed, Coulibaly, and Zlate, 2015; Aizenman,…”
Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows (2017, background): “In their empirical analysis, Fratzscher et al. (2013) find evidence in favor of this line of reasoning.”
Large Capital Inflows, Sectoral Allocation and Economic Performance (2015, result): “…appetite is a cause of inflows episodes, but we do note that the pattern we uncover is consistent with the findings of Forbes and Warnock (2012) and Fratzscher (2012) as well as Rey (2013), who present evidence of a causal role 18We observe the same pattern if we employ an alternate measure of…”
The Volatility of Capital Flows in Emerging Markets: Measures and Determinants (2017, background): “…and Fiess (2016)), yet it has also been pointed out how these effects over capital flow levels are highly heterogenous across countries, due to differences in the quality of domestic institutions, country risk and the strength of domestic macroeconomic fundamentals (Fratzscher (2012), IMF (2016a)).”
Monetary Policy Spillovers and the Trilemma in the New Normal: Periphery Country Sensitivity to Core Country Conditions (2016, positive): “…especially in comparison to the preceding decade of illusory tranquility.6 Many studies such as Ahmed and Zlate (2013), Forbes and Warnock (2010), Fratzscher (2011), and Ghosh, et al. (2012) have documented the importance of global factors such as advanced economy interest rates and global risk…”