| Abstract: |
This paper examines the new trends in research on capital flows fueled by the
2007-2009 Global Crisis. Previous studies on capital flows focused on
current-account imbalances and net capital flows. The Global Crisis changed
that. The onset of this crisis was preceded by a dramatic increase in gross
financial flows while net capital flows remained mostly subdued. The attention
in academia zoomed in on gross inflows and outflows with special attention to
cross border banking flows before the crisis erupted and the shift towards
corporate bond issuance in its aftermath. The boom and bust in capital flows
around the Global Crisis also stimulated a new area of research: capturing the
“global factor.” This research adopts two different approaches. The
traditional literature on the push-pull factors, which before the crisis was
mostly focused on monetary policy in the financial center as the “push
factor,” started to explore what other factors contribute to the comovement of
capital flows as well as to amplify the role of monetary policy in the
financial center on capital flows to the periphery. This new research focuses
on global banks’ leverage, risk appetite, and global uncertainty. Since the
“global factor” is not known, a second branch of the literature has captured
this factor indirectly using dynamic common factors extracted from actual
capital flows or movements in asset prices. |