Push Factors and Capital Flows to Emerging Markets: Why Knowing Your Lender Matters More Than Fundamentals
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This paper analyzes the behavior of gross capital inflows across 34 emerging markets. Findings suggest that emerging markets need to closely monitor their lenders and investors to assess their inflow exposures to global push factors.
The paper analyzes the gross capital inflows’ behavior across 34 emerging markets (EMs). It finds that aggregate inflows to EMs comove considerably, that countries relying more on international funds and global banks are more sensitive to push factors, and that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors. While global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow. Meanwhile, the sensitivity to common dynamics varies significantly across borrower countries, affected strongly by market structure characteristics rather than their institutional fundamentals.