The Natural Level of Capital Flows / John D. Burger, Francis E. Warnock, Veronica Cacdac Warnock.

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Burger, John D

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26184.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We put forward a theory-based time-varying supply-side measure of the natural level of capital flows, KF*. Out-of-sample empirical features of KF* are impressive. For countries that have quarterly time series data of capital flows, we show that KF* is a level to which flows converge in the medium term; greatly improves our ability to model notoriously volatile capital flows; and performs well against out-of-sample and in-sample filtering techniques. The gap between actual inflows and KF* also helps predict both 6-quarters ahead sudden stop episodes and medium-term equity returns. We close with how KF* and lessons from the global financial crisis help us think about capital flows during the Covid-19 shock.

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Working Paper	Biblioteca Digital	Colección NBER	nber w26184 (Browse shelf(Opens below))	Not For Loan

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August 2019.

We put forward a theory-based time-varying supply-side measure of the natural level of capital flows, KF*. Out-of-sample empirical features of KF* are impressive. For countries that have quarterly time series data of capital flows, we show that KF* is a level to which flows converge in the medium term; greatly improves our ability to model notoriously volatile capital flows; and performs well against out-of-sample and in-sample filtering techniques. The gap between actual inflows and KF* also helps predict both 6-quarters ahead sudden stop episodes and medium-term equity returns. We close with how KF* and lessons from the global financial crisis help us think about capital flows during the Covid-19 shock.