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The analysis in this note has also been presented in the Global Financial Stability Report in different forms, prepared under the guidance of Tobias Adrian and Fabio Natalucci. The authors also thank Lucyna Gornicka for valuable guidance and analytical contribution, including in previous versions of the Global Financial Stability Report. The authors thank Patrick Schneider for excellent research assistance and Anna Ilyina, Jeff Williams and Dimitris Drakopoulos for comments.
In principle, a lower GDP per capita should be associated with higher average flows (since capital should be expected to flow to capital-scarce countries) but other effects are conceivable—for example, differences in GDP per capita are also correlated with differences in financial and institutional development.
The overall results hold true even when only the coefficients of the extreme quantiles are considered but averaging across quantiles gets an approximation of the shape of the distribution.