Has the Global Financial Cycle Exacerbated Cross-border Capital Flows: Evidence of Cross-country Sample from Structural Perspective

QIANG Guo-ling; WANG Wei-tao; DONG Ya-jie

Volume 38 Issue 6

Nov. 2023

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QIANG Guo-ling, WANG Wei-tao, DONG Ya-jie. Has the Global Financial Cycle Exacerbated Cross-border Capital Flows: Evidence of Cross-country Sample from Structural Perspective[J]. Journal of Guangdong University of Finance & Economics, 2023, 38(6): 33-53.

Citation:

QIANG Guo-ling, WANG Wei-tao, DONG Ya-jie. Has the Global Financial Cycle Exacerbated Cross-border Capital Flows: Evidence of Cross-country Sample from Structural Perspective[J]. Journal of Guangdong University of Finance & Economics, 2023, 38(6): 33-53.

Citation:

QIANG Guo-ling, WANG Wei-tao, DONG Ya-jie. Has the Global Financial Cycle Exacerbated Cross-border Capital Flows: Evidence of Cross-country Sample from Structural Perspective[J]. Journal of Guangdong University of Finance & Economics, 2023, 38(6): 33-53.

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Has the Global Financial Cycle Exacerbated Cross-border Capital Flows: Evidence of Cross-country Sample from Structural Perspective

1.
School of Finance, Xinjiang University of Finance and Economics, Urumqi 830012
2.
School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

Received Date: 2023-07-09
Available Online: 2023-12-21
Publish Date: 2023-11-28

Abstract

Abstract

Based on the cross-country sample data from 1998 to 2020, this paper discusses the impact of the global financial cycle on cross-border capital flows, as well as the regulatory role and heterogeneity of institutional environmental factors from a structural perspective. The test results show that the total cross-border capital flow, portfolio investment and other investments have significant pro-cyclical characteristics, but the direct investment has not; improved domestic financial risks, higher levels of financial development, and increased exchange rate stability will strengthen the impact of the global financial cycle on cross-border capital flows. The heterogeneity test shows that the pro-cyclical characteristics of security investment are mainly driven by enterprises, while other investments are mainly driven by commercial banks. When the GFC rises, the inflow of total cross-border capital, portfolio investment and other investments is more pro-cyclical. After the financial crisis, portfolio investment and other investments are more sensitive to the GFC. Further analysis shows that global trade uncertainty and the Federal Reserve's monetary policy can affect cross-border capital flows through GFC. The results from expansion model test show that there are significant differences in the characteristics of changes in reserve policy in different types of economies, and emerging market economies tend to use foreign exchange reserves to hedge risks and stabilize exchange rates. The research conclusions provide empirical evidence and policy implications for the macro-prudential supervision of cross-border capital flows and the prevention and resolution of cross-border capital flow risks under the new situation.
- global financial cycle,
- cross-border capital flows,
- pro-cyclical characteristics,
- reserve assets change

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References(40)

References

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