Do Contagion Effects Exist in Capital Flow Volatility?

Date: September 2012
Type: Papers and Briefs
Subject:
Series: Economics Working Papers
ISSN: 1655-5252 (print)
Author: Park, Cyn-Young; Lee, Hyun-Hoon

Description

The paper aims to assess what influences volatility of capital flows to emerging countries and whether or not there is a spillover or contagion effect in the volatility. The empirical results suggest strong and significant contagion effects from global and regional volatilities on the volatility of capital flows in different types to individual economies. The evidence of contagion from global and regional volatilities implies that there is a strong need for global and regional policy cooperation to contain the spillover or contagion effects. However, other policy variables have a differential and time-varying effect on volatility of different types of capital inflow, presenting policy dilemma and challenge to producing coordinated efforts by global and regional policy makers.

Contents

  • Abstract
  • Introduction
  • Descriptive Analysis
  • Empirical Specification
  • Results
  • Summary and Conclusions
  • References