The Main Determinants of Capital In ows in Emerging Market Economies: Does the Exchange Rate Regime Matter?

Abstract

There is a bulk of literature in analyzing the impacts of exchange rate regimes (ERRs) on capital ows into emerging market economies. However, these studies mainly do not take into account integration and cointegration properties of variables. This paper aims to tackle this important issue by investigating whether ERRs matter for the impacts of the main push (global nancial conditions, GFC) and pull (real GDP) factors on capital in ows into emerging market economies. We nd that worsening GFC decreases all types of capital in ow except foreign direct investments in case of oating ERR. This impact is statistically signicant only for portfolio in ows in case of managed ERR. The pull factor is often positive and statistically signicant in determining capital in ows in the long-run only under oating ERRs. These results suggest that the long-run impacts of the main pull and push factors on capital in ows are often magnied under more exible ERRs.