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Forecasting capital flows to emerging markets: a Kalman filtering approach

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  • Ashoka Mody
  • Mark Taylor
  • Jung Yeon Kim

Abstract

This article provides capital flow forecasts to 32 developing countries using an unobserved components model and maximum likelihood Kalman filtering estimation. Permanent and temporary components of capital flows of bond, equity and syndicated loans are separated out to the countries concerned. Based on these models, and using monthly data up to December 2000, forecasts of various capital flows are presented for the period January 2001 to December 2003. The results of the time series based forecasts are then compared to those obtained using a fundamentals-based approach.

Suggested Citation

  • Ashoka Mody & Mark Taylor & Jung Yeon Kim, 2001. "Forecasting capital flows to emerging markets: a Kalman filtering approach," Applied Financial Economics, Taylor & Francis Journals, vol. 11(6), pages 581-589.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:6:p:581-589
    DOI: 10.1080/09603100110076321
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    References listed on IDEAS

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    1. Mody, Ashoka & Taylor, Mark P & Kim, Jung Yeon, 2001. "Modelling Fundamentals for Forecasting Capital Flows to Emerging Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 201-216, July.
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    Cited by:

    1. Ashoka Mody & Mark P. Taylor, 2013. "International capital crunches: the time-varying role of informational asymmetries," Applied Economics, Taylor & Francis Journals, vol. 45(20), pages 2961-2973, July.
    2. Lai, Jennifer /J.T., 2008. "Capital flow to China and the issue of hot money: an empirical investigation," MPRA Paper 32539, University Library of Munich, Germany, revised Sep 2009.
    3. Giulio Cifarelli & Giovanna Paladino, 2009. "The Buffer Stock Model Redux? An Analysis of the Dynamics of Foreign Reserve Accumulation," Open Economies Review, Springer, vol. 20(4), pages 525-543, September.
    4. Giulio Cifarelli & Giovanna Paladino, 2008. "Reserve overstocking in a highly integrated world. New evidence from Asia and Latin America," The European Journal of Finance, Taylor & Francis Journals, vol. 14(4), pages 315-336.
    5. Sur, Abhisek & Ray, Partha & Nandy, Amarendu, 2019. "India’s external commercial borrowing: Pulled by domestic fundamentals or pushed by global conditions?," Journal of Asian Economics, Elsevier, vol. 61(C), pages 65-77.
    6. Fredy Gamboa‐Estrada, 2020. "The Determinants Of Private Capital Flows In Emerging Economies: The Role Of The Fed'S Unconventional Monetary Policy," Contemporary Economic Policy, Western Economic Association International, vol. 38(4), pages 694-710, October.

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