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(No) worries about the new shape of international capital flows

Author(s): Matthieu BussiƩre, Julia Schmidt and Natacha Valla

Date published: May 2017

SUERF Policy Note, Issue No 12
Matthieu Bussière, Banque de France
Julia Schmidt, Banque de France
Natacha Valla, European Investment Bank and Paris School of Economics

JEL-Codes: F32, F34, F38, F42, G15.

Keywords: Capital flows, cross-border lending, debt vs. equity, FDIs, financial globalization, global imbalances,
portfolio investments, retrenchment.

Many worry that international capital flows could have permanently retrenched and structurally become more volatile in the post 2008 period. This Suerf Policy Note highlights facts suggesting this may not be the case. While the literature acknowledges the importance of gross capital flows to understand international financial dynamics, there is little consensus about the post-crisis “new normal” of international capital flows. Particularly reassuring is the stability and resilience of “equity-like” cross border financial flows. Far from having massively retrenched, these have kept a healthy momentum and offset the meltdown of bank and debt international financing. The emerging world is set to benefit from this trend.

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SUERF Policy Note, No 12SUERF Policy Note, No 12

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