How Does Geopolitics Affect Capital Flows? The Predominant Role of Institutions

What compels sudden stops in capital flows to emerging markets?

Is there a role for political risk, as reflected in a country’s institutions: responsiveness of government to policy concerns, rule of law, bureaucracy, forex regime, et al.

Using our ICRG data, this new piece published in Journal of Economic Integration isolates global factors (including contagion) and short-term capital flows as meaningful, but the quality of institutions appears to be more significant.

Finally, the findings of the structural VAR analysis suggest that the economic effects of sudden stop shocks, especially those stemming from debt-based capital inflows.

Have a look:

(https://www.jstor.org/stable/27365543?searchText=icrg&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3Dicrg%26so%3Dnew&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3A5f88d044f85c9e90e213c5b119887b06)

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The PRS Group

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