Coincident Indicators of Capital Flows

February 1, 2012

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Format: Chicago

Malika Pant, and Yanliang Miao. Coincident Indicators of Capital Flows, (USA: International Monetary Fund, 2012) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Capital flows data from Balance of Payments statistics often lag 3-6 months, which renders timely surveillance and policy deliberation difficult. To address the tension, we propose two coincident composite indicators for capital flows that improve upon existing proxies. We find that the most widely used proxy, the capital tracker, often overpredicts net flows by 30 percent. We augment the tracker into a composite indicator by assigning to it a lesser but optimally estimated weight while incorporating other regional and global coincident correlates of capital flows. The proposed composite indicator of net flows outperforms the capital tracker in its original format. To complement the indicator with an even timelier variant, we also utilize the EPFR high frequency coverage of gross bond and equity flows as an indicator on foreign investors' sentiment.

Subject: Balance of payments, Bonds, Capital flows, Cyclical indicators, Economic growth, Financial institutions, International trade, Stocks, Trade balance

Keywords: Asia and Pacific, Bond flow, Bonds, Border, Capital, Capital Flows, Capital Tracker, Coincident Indicators, Cyclical indicators, EPFR data, EPFR flow, Europe, Global, Latin America EMs, Merchandise trade balance, MSCI index, Net capital, Other EMs, Stocks, Trade balance, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/055
Stock No:

WPIEA2012055
ISBN:

9781463937737
ISSN:

1018-5941

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