Abstract
We study how the effect of global and domestic factors on capital flows towards emerging economies has changed in the last 25 years. We find that both the global financial crisis and the so-called ‘taper tantrum’ event, when investors perceived the end of the US Federal Reserve’s unconventional monetary policy, triggered changes in the sensitivity of capital inflows to their main drivers. In particular, we provide evidence that during the period between the global financial crisis and the taper tantrum, international investors devoted less attention to domestic factors. Nevertheless, the taper tantrum marked the beginning of a new phase, characterized by increased sensitivity to both global factors and domestic vulnerabilities.
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