Abstract
We empirically gauge the relative importance of the various push and pull factors for the magnitude of foreign flows to 51 emerging markets (EMs) across quantiles. We propose a quantile regression dynamic panel model with fixed effects and reveal several new findings: (a) Global risk aversion and regional contagion are generally significant across most quantiles. (b) Foreign short-term flows retreat less from EMs with stronger fundamentals during stress episodes. (c) EMs that previously experienced larger portfolio debt and bank inflows tend to suffer more during stress episodes. Hence, we provide novel evidence supporting the global financial cycle hypothesis, investor differentiation hypothesis, and the “more-in-more-out” hypothesis.
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