TY  - JOUR
AU  - Forbes,Kristin J.
AU  - Warnock,Francis E.
TI  - Capital Flow Waves: Surges, Stops, Flight, and Retrenchment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17351
PY  - 2011
Y2  - August 2011
UR  - http://www.nber.org/papers/w17351
L1  - http://www.nber.org/papers/w17351.pdf
N1  - Author contact info:
Kristin Forbes
MIT Sloan School of Management
100 Main Street, E62-416
Cambridge, MA  02142
Tel: 617/253-8996
Fax: 617/258-6855
E-Mail: kjforbes@mit.edu

Francis E. Warnock
Darden Business School
University of Virginia
Charlottesville, VA 22906-6550
Tel: 434/924-6076
Fax: 434/243-8945
E-Mail: warnockf@darden.virginia.edu
M3  - presented at "Global Financial Crisis Conference", June 3-4, 2011
AB  - This paper analyzes waves in international capital flows. We develop a new methodology for identifying episodes of extreme capital flow movements using data that differentiates activity by foreigners and domestics. We identify episodes of “surges” and “stops” (sharp increases and decreases, respectively, of gross inflows) and “flight” and “retrenchment” (sharp increases and decreases, respectively, of gross outflows). Our approach yields fundamentally different results than the previous literature that used measures of net flows. Global factors, especially global risk, are significantly associated with extreme capital flow episodes. Contagion, whether through trade, banking, or geography, is also associated with stop and retrenchment episodes. Domestic macroeconomic characteristics are generally less important, and we find little association between capital controls and the probability of having surges or stops driven by foreign capital flows. The results provide insights for different theoretical approaches explaining crises and capital flow volatility.
ER  -