Welfare State, Inequality, and Globalization: Role of International-capital-flow Direction

In this paper, we use the improved direct method and improved residual method to re-measure the annual scale and to measure the quarterly scale of the short-term international capital flows based on the Chinese Balance of Payment table. At the same time, we use the residual method to estimate the monthly scale of the Chinese short-term international capital flows as well. Then we explain and test these calculated results. Next we apply the results to the lead–lag analysis of macro-economy. To judge whether the short-term international capital flow is a leading indicator, we apply the Kullback–Leibler information method and cross-correlation analysis method to analyze the lead–lag relationship between the short-term international capital flows and macro-economy by selecting some representative macroeconomic indicators as a reference. Our empirical analysis shows that in China, the short-term international capital flow is a leading indicator to macro-economy and a coincident indicator to Purchasing Managers’ Index. In the end, we give some conclusions and policy proposals.

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A Volatilidade do Fluxo de Capital para Economias Emergentes

Brazilian Review of Finance ◽

10.12660/rbfin.v11n3.2013.8759 ◽

2013 ◽

Vol 11 (3) ◽

pp. 421

Author(s):

Katia Rocha ◽

Ajax Moreira

Keyword(s):

Emerging Market ◽

Financial System ◽

Institutional Quality ◽

Capital Flow ◽

Insurance Companies ◽

International Capital ◽

Role Of Government ◽

Panel Model ◽

Bank For International Settlements

The paper proposes a panel model to the determinants of capital flow volatility to a group of 18 emerging market economies (EME) in the period of 2000 to 2011. It studies the robustness of the model regarding different volatility measures; analyses several types of gross capital inflow; focusing the role of government institutional quality and the development of domestic financial system (banks, insurance companies, and capital markets – stocks, bonds and derivatives). The EME analyzed represented roughly 95% of the Emerging Markets Bond Index Global – EMBIG in January 2013, being the biggest destination to international capital flow to EME according to the report of the Bank for International Settlements - BIS (2009). The main conclusion suggests that a reduction of capital flow volatility can be achieved by the adoption of policies that improve government institutional quality and promote development, stability and efficiency of the domestic financial system.

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