TY - BOOK ID - 84873686 TI - Gross Private Capital Flows to Emerging Markets : Can the Global Financial Cycle Be Tamed? AU - Nier, Erlend. AU - Mondino, Tomas. AU - Saadi Sedik, Tahsin. PY - 2014 SN - 149838594X 1484347072 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Capital movements KW - Exports and Imports KW - Finance: General KW - Current Account Adjustment KW - Short-term Capital Movements KW - Portfolio Choice KW - Investment Decisions KW - International Investment KW - Long-term Capital Movements KW - General Financial Markets: General (includes Measurement and Data) KW - Financial Markets and the Macroeconomy KW - International economics KW - Finance KW - Capital flows KW - Emerging and frontier financial markets KW - Private capital flows KW - Capital inflows KW - Financial sector development KW - Balance of payments KW - Financial markets KW - Financial services industry KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:84873686 AB - This paper assesses empirically the key drivers of private capital flows to a large sample of emerging market economies in the last decade. It analyzes the effect of the global financial cycle, measured by the VIX, on capital flows and investigates the role of fundamentals and country characteristics in mitigating or amplifying its effect. Using interaction models, we find the effect of the VIX to be non-linear. For low levels of the VIX, capital flows are driven by fundamental factors. During periods of stress, the VIX becomes the dominant driver of capital flows while other determinants, with the exception of interest rate differentials, lose statistical significance. Our results also suggest that the effect of global financial conditions on gross private capital flows increases with the host country’s level of financial sector development. Finally, our results imply that countries cannot fully insulate themselves from global financial shocks, unless creating a fragmented global financial system. ER -