Determinants, dynamics and implications of international portfolio capital flows

• Main Author: Mandalinci, Zeyyad
• Published: University of Warwick 2014
• Subjects: 330; HG Finance
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.632885

This thesis examines the determinants, the dynamics and the implications of international portfolio capital flows (PCF) to Emerging Markets (EM). It consists of 3 separate chapters focussing on different aspects of international PCFs. The literature documents that international portfolio equity investment depends on factors additional to returns and variance/covariances. First chapter presents a portfolio selection problem that takes into account the presence of additional factors and can match the actual United States (US) investment data. A recent series of IMF Staff Discussion Notes warns that capital controls may deflect PCFs across countries. The second chapter investigates whether these effects exist in a comprehensive global econometric model. Overall, results indicate that there are no significant deflection effects. Furthermore, it studies the domestic effects and the drivers of PCFs. The third chapter analyses the time-varying global drivers of PCFs to EMs in recent decades. Moreover, it involves identifying surge and stop episodes and comparing their time-varying characteristics. Finally, it investigates the effects of the US Quantitative Easing (QE) program on PCFs to EMs in 2009 by conducting a counterfactual exercise. Results indicate that there have been changes in the importance of different factors over time and QE had a significant positive effect on PCFs during 2009.