Factors driving International Capital Flows and the Change after the Global Financial Crisis

This paper investigates factors that drive international capital flows. In particular, we focus on the three points of view on factors that affect gross capital flows: the difference between the periods before and after the outbreak of the Global Financial Crisis (GFC), the difference by capital flow type, and the difference between developed and emerging economies. Therefore, the analysis employs the estimation for panel data of three types of gross capital inflows and outflows (direct investment, portfolio investment, and other investment). In addition, we divide the total sample into subsample periods before and after the GFC and subsample countries of developed and emerging economies. The regression result suggests that the capital flow factors have changed since the GFC and particularly external factors, such as global money supply, foreign stock price, and global risk, have become influential. Global risk influenced inflows of portfolio investment to both emerging and developed economies in all sample periods. In emerging economies, capital flow factors tend to be unclear in the period before the GFC, unlike in developed economies. In addition, we find that only relatively strong capital control measures restricted portfolio investment inflows during and after the GFC when capital flows and their volatility were large.