The Impacts of Global Uncertainty on the Capital Flows in Korea

Abstract

Purpose - The purpose of this study is to examine the impacts of global uncertainty on gross and net capital flows in Korea. Design/methodology/approach We conduct an empirical analysis of the impact of global uncertainty on the net and gross capital flows in korea. To investigate the impacts, we incorporate linear and nonlinear ARDL models. Findings We find global uncertainty has negative impacts on the gross and net capital flows. But this impact is nonlinear. The negative global uncertainty shocks are bigger than the positive global uncertainty shocks on capital flows in Korea. And we find this relationship is noticeable in gross capital inflows. We also find interest rate difference between the US and Korea is the main driving source in capital flow after the Global financial crisis. Research implications or Originality The results of this study suggest that the negative impacts of global uncertainty are noticeable. This means that economic players in financial markets should be more concerned about the bad news.