Geoscience Reference
In-Depth Information
Fig. 9.6
Growth of gross inflows.
Source
: Author's construction based on the sources in Fig.
9.5
flows.
17
Inflows are equities-led, debt-led, and bank-led if the increase is mainly
through equities, debt, and banks, respectively.
To better understand how each fluctuates, inflows are classified as “surges” if
there is a sharp increase, and “stops” for a sharp decrease. For gross outflows, the
terms “flight” and “retrenchment” are used. While “flight” refers to investors
moving large amounts of capital abroad, “retrenchment” occurs when domestic
investors liquidate foreign investments. Based on a one-standard deviation of the
change in the mean capital flows as the limit (for example, in the case of inflows it is
shown by dash lines in Fig.
9.6
) beyond which they are labeled according to the
above classifications, the following episodes are observed:
Surge Episodes
Equity-led: 2009Q4-2010Q1
Debt-led (excl. banking flows): 2002Q1-Q3; 2007Q2; 2007Q4
Bank-led: 1999Q1-Q3; 2004Q1; 2009Q3; 2010Q2; 2012Q4
Stop Episodes
Equity-led: 2000Q4; 2004Q4; 2006Q4-2007Q1; 2008Q1-Q3
Debt-led (excl. banking flows): 1997Q1-Q3; 2001Q1-Q3
Bank-led: 1996Q4; 1997Q4-1998Q2; 2008Q4-2009Q1; 2011Q3-2012Q1
17
See Forbes and Warnock (
2012
). However, unlike their analysis, I distinguish “debt” from
“bank” because banks are more prone to deleveraging and procyclicality, thus having more direct
impact on the real sector.
