Work

Capital flow dynamics and the synchronization of financial cycles and business cycles in emerging market economies

Year: 2024

Type: article

Abstract: This study assesses the dynamics of capital flow, financial cycles, and business cycles in Emerging Market Economies (EMEs). We show that: (a) capital flow cycles tend to be more volatile than financial and business cycles, (b) although significant heterogeneities exist in the dynamics of these cycles across EMEs, financial and business cycles tend to be similar in terms of amplitudes, (c) significant concordance exists between different cycles and between the same cycles across countries, and (d) capital flow cycles tend to lead financial and business cycles. These findings provide clear guidance on the use of central bank policy mix strategy in response to capital flows, financial, and business cycles. Our results also imply strong interconnection between EMEs, in the sense that they appear to simultaneously experience expansions and recessions.

Source: Journal of International Financial Markets Institutions and Money

DOI: 10.1016/j.intfin.2024.101980

Authors: Solikin M. Juhro, Bernard Njindan Iyke, Paresh Kumar Narayan

Institutions: Bank Indonesia, La Trobe University, Monash University

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,840