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Boom - Bust Capital Flow Cycles

Author

Listed:
  • Graciela Laura Kaminsky

    (George Washington University)

Abstract
This paper examines the new trends in research on capital flows fueled by the 2007-2009 Global Crisis. Previous studies on capital flows focused on current-account imbalances and net capital flows. The Global Crisis changed that. The onset of this crisis was preceded by a dramatic increase in gross financial flows while net capital flows remained mostly subdued. The attention in academia zoomed in on gross inflows and outflows with special attention to cross border banking flows before the crisis erupted and the shift towards corporate bond issuance in its aftermath. The boom and bust in capital flows around the Global Crisis also stimulated a new area of research: capturing the “global factor.†This research adopts two different approaches. The traditional literature on the push-pull factors, which before the crisis was mostly focused on monetary policy in the financial center as the “push factor,†started to explore what other factors contribute to the comovement of capital flows as well as to amplify the role of monetary policy in the financial center on capital flows to the periphery. This new research focuses on global banks’ leverage, risk appetite, and global uncertainty. Since the “global factor†is not known, a second branch of the literature has captured this factor indirectly using dynamic common factors extracted from actual capital flows or movements in asset prices.

Suggested Citation

  • Graciela Laura Kaminsky, 2019. "Boom - Bust Capital Flow Cycles," Working Papers 2019-7, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2019-7
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    File URL: http://www2.gwu.edu/~iiep/assets/docs/papers/2019WP/KaminskyIIEP2019-7.pdf
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    Citations

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    Cited by:

    1. Shiyi Wang, 2019. "Capital Flow Volatility: The Effects of Financial Development and Global Financial Conditions," 2019 Papers pwa945, Job Market Papers.
    2. Andrieş, Alin Marius & Chiper, Alexandra Maria & Ongena, Steven & Sprincean, Nicu, 2024. "External wealth of nations and systemic risk," Journal of Financial Stability, Elsevier, vol. 70(C).
    3. Iñaki Aldasoro & Stefan Avdjiev & Claudio Borio & Piti Disyatat, 2023. "Global and Domestic Financial Cycles: Variations on a Theme," International Journal of Central Banking, International Journal of Central Banking, vol. 19(5), pages 49-98, December.
    4. Graciela Laura Kaminsky & Leandro Medina & Shiyi Wang, 2020. "The Financial Center Leverage Cycle: Does It Spread around the World?," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 504-510, May.
    5. Graciela L. Kaminsky, 2019. "Boom-Bust Capital Flow Cycles," NBER Working Papers 25890, National Bureau of Economic Research, Inc.
    6. Emter, Lorenz, 2023. "Leverage cycles, growth shocks, and sudden stops in capital inflows," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 711-731.

    More about this item

    Keywords

    The Global Crisis; Capital flow cycles; global banks; “push†and “pull†factors; corporate borrowing; global factors; dynamic latent factor models.;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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