Abstract
This paper conducts an empirical analysis based on the balanced panel data of 18 emerging market economies between Q1, 2005 and Q3, 2017 to identify the influence factors of short-term international capital and discuss their time-varying characteristics. The system GMM model shows that short-term international capital is negatively correlated with the VIX (Volatility Index) and US real GDP growth rate, and is positively correlated with the appreciation of emerging markets’ currencies. The TVP-VAR model shows that short-term international capital has positive impulse response to its own changes, appearing “herd effect”, and has the largest impulse response to US GDP growth, VIX, US dollar appreciation and itself within two quarters, which are all consistent with the variability of itself. What’s more, the VIX exhibits obvious time-varying characteristics. The financial crisis expands the influence of VIX and the US GDP growth rate, and the first round of QE amplifies the influence of VIX.
Highlights
Since the 21st century, the development of internet technology has greatly enriched and improved the channels and efficiency of international capital circulation, but it has led the development of international capital flows to the result of more short-term and high-frequency
The Fed has implemented QE, the federal interest rate has remained at a low level, and the currency issuance has been increased, prompting a large influx of international capital flowed into emerging markets
The short-term international capital flows in emerging markets have large standard deviation and large range, indicating that the volatility of the short-term capital is strong; secondly, economic fluctuations happen more often in the emerging markets under rapid development; thirdly, US dollar is appreciated in total during the sample time; fourthly, there is a large fluctuation in global market panic within the sample interval; the market value of each economy’s stock accounted for approximately 50% of the GDP in current quarter when they are translated linearly into annual data and it is quite different from the developed countries
Summary
Since the 21st century, the development of internet technology has greatly enriched and improved the channels and efficiency of international capital circulation, but it has led the development of international capital flows to the result of more short-term and high-frequency. In the emerging markets where large-scale international capital inflows exist before the financial crisis, there is a widespread problem of sharply reducing in capital inflows or increasing sharply in capital outflows during the crisis, and in different time periods, the influence factors are different. This paper takes the interest rate, real GDP growth rate, change in the exchange rate, and financial system development in emerging markets, the interest rate and real GDP growth rate in developed countries, and the VIX as the main research direction, selects the quarterly data of 18 emerging market economies between the first quarter of 2005 and the third quarter of 2017 to build balanced panel data and identify the influence factors of short-term international capital flows in emerging market economies through the random effects model and system generalized method of moments (GMM). The third part is the empirical research, which can be further divided into the identification of influence factors and the analysis of time-varying characteristics, and the paper attempts to discuss the impact of major changes in external policies. Limited by the availability of data, the complexity of short-term international capitals, and the limitations of TVP-VAR models, there may be problems with insufficient variables
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