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Global Financial Shocks and Foreign Asset Repatriation :, Do Local Investors Play a Stabilizing Role?, Gustavo Adler, Marie-Louise Djigbenou, Sebastian Sosa

We study the dynamic response of gross capital flows in emerging market economies to different global financial shocks, using a panel vector-autoregressive (PVAR) setting. Our focus lies primarily on the potentially stabilizing role played by domestic investors in offsetting the response of foreign investors to global shocks. We find evidence of such role, but its existence and magnitude depend on the nature of the shock. Local investors play a meaningful stabilizing role in the face of global uncertainty shocks, as well as shocks to long-term U.S. interest rates. However, while in the former case, sizeable asset repatriation largely offsets the retrenchment of non-residents, in the latter case the extent of the offsetting is much more limited. Meanwhile, residents and non-resident behave alike in response to short-term U.S. interest rate shocks, pulling capital away from emerging markets, although magnitudes are not economically significant. The results shed light on the potential impact of the Fed’s QE tapering on emerging market economies
Table Of Contents
Cover; Abstract; Contents; I. Introduction; Figures; 1: Global Financial Shocks, 1990-2012; 2: Gross Capital Flows in Selected Countries, 2006-12; II. Empirical Approach; Tables; 1: Impact of Global Financial Shocks on Capital Flows to EMEs; A. Panel VAR model; B. Data; III. Results; A. Benchmark specification; 2: Descriptive Statistics; 3: Response of Net Capital Flows to Global Financial Shocks; 4: Response of Gross Capital Flows to Global Financial Shocks; 5: Response of Gross Capital Flows to Other Foreign Shocks; B. Extensions
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (32 p.)
Specific Material Designation
Form Of Item

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