Title: The dynamics of equity capital flows by global investment funds to emerging economies
Authors: Andreas Savvides - Cyprus University of Technology (Cyprus) [presenting]
Duc Nguyen - IPAG (France)
Gazi Salah Uddin - Linkoping University (Sweden)
Abstract: The dynamics of flows of equity capital by global investment funds to a group of emerging market economies (EMEs) are investigated for the period 1998-2013. Equity capital flows by foreign funds respond readily to changes in financial conditions and are thought to be a good gauge of investor sentiment towards EMEs. Our methodology uses the quantile regression approach for each emerging country separately and the dynamic panel quantile regression approach for the 23 emerging countries as a group. The advantage of the quantile regression approach is to capture possible asymmetric responses of equity capital flows to internal vs external shocks, subject to various cycles (boom, burst, normal). Our study looks at: (i) the dynamic response of capital flows to the recent unconventional monetary policy; (ii) how uncertainty in global financial system is transmitted to capital flows; we pay particular attention to account for periods of risk on/risk off in how these factors determine capital inflows into EMEs; (iii) the responsiveness of equity capital to changes in global imbalances; and (iv) the extent to which foreign equity capital flows respond to domestic monetary developments as these are manifested in changes in the differential between domestic and foreign interest rates.