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Push Factors and Capital Flows to Emerging Markets: Why Knowing Your Lender Matters More Than Fundamentals
Author:
Mr. Eugenio M Cerutti
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Mr. Stijn Claessens
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Mr. Damien Puy null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 127
Language:
English
Publication Date:
22 Jun 2015
DOI:
https://doi.org/10.5089/9781513526638.001
ISBN:
9781513526638
ISSN:
1018-5941
Pages:
43
Keywords:
WP; equity; equity flow; portfolio equity; Push factors; capital flows; emerging markets; mutual funds; global banks; bond flow; MSCI emerging market index; market characteristic; investor base; inflows to EMs; equity inflow; Bonds; Stocks; Stock markets; Capital inflows; Global; Europe; Africa; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper analyzes the behavior of gross capital inflows across 34 emerging markets (EMs). We first confirm that aggregate inflows to EMs co-move considerably. We then report three findings: (i) the aggregate co-movement conceals significant heterogeneity across asset types as only bank-related and portfolio bond and equity inflows do co-move; (ii) while global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow; and (iii) the sensitivity to common dynamics varies significantly across borrower countries, with market structure characteristics (especially the composition of the foreign investor base and the level of liquidity) rather than borrower country’s institutional fundamentals strongly affecting sensitivities. Countries relying more on international funds and global banks are found to be more sensitive to push factors. Our findings suggest that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund