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What Determines Capital Flow Dynamics for Russia
[Что Определяет Динамику Движения Капитала Для России]

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  • Prilepskiy, Ilya (Прилепский, Илья)

    (Economic Expert Group; Financial Research Institute)

Abstract

The paper studies the impact of external supply or “push” factors (global economic and financial indicators, oil prices, sanctions etc.) and internal demand or “pull” factors (actual and expected GDP growth rates, institutional indicators, openness indicators etc.) on private sector capital flow components (foreign direct, portfolio and other investments) and capital flow aggregates (gross capital inflow and outflow, net capital inflow) in the Russian case, based on regressions utilizing 1994–2018 quarterly data. Among the external factors, the VIX volatility index, the real effective exchange rate of the U.S. dollar and the sanction intensity index prove to be consistently significant. The impact of sanction shocks is found to weaken over time, probably reflecting adaptation to sanctions. Among the internal factors, only the expected GDP growth rates prove significant. In contrast to existing literature on emerging markets as a whole, no significant impact of the interest rate and GDP growth differentials (with respect to advanced economies) is established. It is demonstrated that the push factors account for the larger share of explained variance of gross capital inflow and outflow as well as net capital inflow. In addition, capital flow volatility indicators are analyzed, with positive correlations found for the VIX index, the U.S. interest rates, the oil price volatility, and the financial account openness index.

Suggested Citation

  • Prilepskiy, Ilya (Прилепский, Илья), 2019. "What Determines Capital Flow Dynamics for Russia [Что Определяет Динамику Движения Капитала Для России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 8-35, December.
    • Handle: RePEc:rnp:ecopol:ep1940
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    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    2. Mrs. Swarnali A Hannan, 2018. "Revisiting the Determinants of Capital Flows to Emerging Markets--A Survey of the Evolving Literature," IMF Working Papers 2018/214, International Monetary Fund.
    3. Карев М. Г., 2009. "Инфляция, Реальный Обменный Курс И Денежная Политика В Экономике С Ограниченной Эластичностью Потока Капитала По Процентной Ставке," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 13(3), pages 329-359.
    4. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
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    More about this item

    Keywords

    capital flows; volatility; foreign direct investment; sanctions; regression analysis;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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