European Parliament Library

Official Financial Flows, Capital Mobility, and Global Imbalances, Tamim Bayoumi, Joseph Gagnon, Christian Saborowski

We use a cross-country panel framework to analyze the effect of net official flows (chiefly foreign exchange intervention) on current accounts. We find that net official flows have a large but plausible effect on current account balances. The estimated effects are larger with instrumental variables (42 cents to the dollar on average compared to 24 without instruments), reflecting a possible downward bias in regressions without instruments owing to an endogenous response of net official flows to private financial flows. We consistently find larger impacts of net official flows when international capital flows are restricted and smaller impacts when capital is highly mobile. A further result is that there is an important positive effect of lagged net official flows on current accounts that we believe operates through the portfolio balance channel
Table Of Contents
Cover; Contents; I. Introduction; II. Background and Motivation; A. Current Accounts and Official Flows; B. The Case of No Private Flows; C. Private Flows and Arbitrage; D. Capital Controls; E. Institutional Quality; F. Financial Market Measures; G. Private Flows and Portfolio Balance; III. Empirical Specification; Box; 1. Investment as Pure Diversification; IV. Baseline Regression Results; V. Robustness to Sample and Specification; VI. Comparison to Previous Studies; VII. Illustration of Fitted Model for Individual Countries; VIII. Conclusion; Tables; 1. Definition of Instruments
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (46 p.)
Specific Material Designation
Form Of Item

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