Gross Capital Flows : Dynamics and Crises

By Fernando A. Broner, T. Didier, Aitor Erce, S. Schmukler. 2011

666 citations recorded by the source corpus.

This paper analyzes the joint behavior of international capital flows by foreign and domestic agents -- gross capital flows -- over the business cycle and during financial crises. The authors show that gross capital flows are very large and volatile, especially relative to net capital flows. When foreigners invest in a country, domestic agents tend to invest abroad, and vice versa. Gross capital flows are also pro-cyclical, with foreigners investing more in the country and domestic agents investing more abroad during expansions. During crises, especially during severe ones, there is retrenchment, that is, a reduction in both capital inflows by foreigners and capital outflows by domestic agents. This evidence sheds light on the nature of shocks driving capital flows and helps discriminate among existing theories. The findings seem consistent with shocks that affect foreign and domestic agents asymmetrically, such as sovereign risk and asymmetric information.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8604bfb9003e92cb6bd1f74fd2ad76afe4f27fac

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Citations in the corpus

Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks? (2015, neutral): “…on the nature of these gross flows, see for example, Powell et al. (2002), Cowan et al (2008), Rothenberg and Warnock (2011), Forbes and Warnock (2012), Bruno and Shin (2012), Calderón and Kubota (2013), Bluedorn et al (2013), Cavallo et al (2013), Broner et al (2013), and Alberola et al (2013).”
On the International Transmission of Shocks : Micro-Evidence from Mutual Fund Portfolios (2012, neutral): “The crisis variable comes from Broner et al. (2010) and dates a crisis the years when a country suffers at least a banking, debt, or currency crisis, according to indicators widely used in the literature.”
The Share of Systematic Variation in Bilateral Exchange Rates (2018, background): “A recent literature in international economics shows that gross outflows and inflows are more informative than net flows (see Lane and Milesi-Ferretti, 2007, Obstfeld, 2012, Forbes and Warnock, 2012, and Broner et al., 2013).”
Large Capital Inflows, Sectoral Allocation and Economic Performance (2015, background): “…a broad measure of capital inflows may seem at odds with recent work on the subject, which has shown important differences in the behavior of private and public flows (Alfaro et al., 2014) as well as gross and net flows (Rothenberg and Warnock, 2011; Forbes and Warnock, 2012; Broner et al., 2013).”
Self-oriented monetary policy, global financial markets and excess volatility of international capital flows (2015, neutral): “1 The conceptual framework employed in our paper is similar to that of Bruno and Shin (2014), although our structural model and analysis is very different from their paper. In some respects our modelling strategy is close to the works by Devereux and Yetman (2010), Dedola and Lombardo (2012), Dedola”
International Reserves and Rollover Risk (2013, neutral): “The behavior of flows in the data is the one presented by Broner et al. (2013).”
How Important is the Global Financial Cycle? Evidence from Capital Flows (2017, background): “6 Since this offset is more common for advanced countries than for emerging markets, in part as the private sector in advanced countries typically has larger gross foreign asset positions, global factors are typically more important for the latter [see IMF (2013) and Forbes and Warnock (2012); Brone”
The Flight Home Effect: Evidence from the Syndicated Loan Market During Financial Crises (2012, background): “, 2010), a reduction in gross capital flows (Broner et al., 2010), a reversal of capital flows from advanced economies to emerging markets (Tong and Wei, 2010; Milesi-Ferretti and Tille, 2010), and a decline in international bank lending (Cetorelli and Goldberg, 2010).”