Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148116
Authors: 
Friedrich, Christian
Guérin, Pierre
Year of Publication: 
2016
Series/Report no.: 
Bank of Canada Staff Working Paper 2016-9
Abstract: 
This paper proposes a novel methodology for identifying episodes of strong capital flows based on a regime-switching model. In comparison with the existing literature, a key advantage of our methodology is to estimate capital flow regimes without the need for context- and sample-specific assumptions. We implement this approach using weekly fund flows data for a large set of advanced and emerging economies. As an application of our methodology to the global financial cycle literature, we use a time-varying structural vector-autoregressive (VAR) model to assess the impact of U.S. stock market volatility (VIX) shocks and U.S. monetary policy shocks on aggregated measures of equity outflow and equity inflow episodes. Our results indicate that both VIX and U.S. monetary policy shocks had substantially time-varying effects on episodes of strong capital flows over our sample period.
Subjects: 
International topics
International financial markets
Econometric and statistical methods
Uncertainty and monetary policy
JEL: 
F21
F32
G11
Document Type: 
Working Paper

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