{"title":"What leads some countries to experience larger decreases in foreign flows during low-flow episodes? Evidence from international portfolio flows","authors":"Xichen Wang , Xiaomei Duan","doi":"10.1016/j.jimonfin.2024.103165","DOIUrl":null,"url":null,"abstract":"<div><p>This paper investigates the drivers explaining the heterogeneous responses of foreign portfolio investors across 43 emerging markets and developing economies (EMDEs) during low-flow episodes. Our investigations reveal several findings: (a) During low-flow episodes, EMDEs with stronger macroeconomic/institutional fundamentals—e.g., larger foreign reserves, less public indebtedness, and better institutional quality—suffer fewer reductions in foreign inflows. (b) EMDEs with more open/developed financial markets attract more portfolio inflows during surges but suffer larger declines during stops. Hence, we provide evidence supporting the foreign investor differentiation (according to fundamentals) and the mixed blessing of financial sectors hypothesis.</p></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"148 ","pages":"Article 103165"},"PeriodicalIF":2.8000,"publicationDate":"2024-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Money and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0261560624001529","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper investigates the drivers explaining the heterogeneous responses of foreign portfolio investors across 43 emerging markets and developing economies (EMDEs) during low-flow episodes. Our investigations reveal several findings: (a) During low-flow episodes, EMDEs with stronger macroeconomic/institutional fundamentals—e.g., larger foreign reserves, less public indebtedness, and better institutional quality—suffer fewer reductions in foreign inflows. (b) EMDEs with more open/developed financial markets attract more portfolio inflows during surges but suffer larger declines during stops. Hence, we provide evidence supporting the foreign investor differentiation (according to fundamentals) and the mixed blessing of financial sectors hypothesis.
期刊介绍：
Since its launch in 1982, Journal of International Money and Finance has built up a solid reputation as a high quality scholarly journal devoted to theoretical and empirical research in the fields of international monetary economics, international finance, and the rapidly developing overlap area between the two. Researchers in these areas, and financial market professionals too, pay attention to the articles that the journal publishes. Authors published in the journal are in the forefront of scholarly research on exchange rate behaviour, foreign exchange options, international capital markets, international monetary and fiscal policy, international transmission and related questions.
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