Spring Meetings

OVERVIEW

This Analytical Corner presents on-going work studying the main drivers of capital flows to Emerging Market economies (EMs) motivated by the recent period of capital outflows amid sharp monetary policy tightening in the US. Capital flow episodes across EMs are analyzed with a structural dynamic factor model to assess the comparative importance of supply and demand factors in driving capital flows to and from EMs, and of global versus country-specific shocks. Global supply forces are central drivers, shaping the yields and --to a lesser extent-- the volume of flows. The US monetary policy stance is one of their forces behind these drivers.