RDP 2009-09: Volatility in International Capital Movements 5. Conclusion

Capital has become increasingly mobile as global financial integration has accelerated. Interestingly, while industrialised economies have experienced increased volatility in different types of capital flows as financial globalisation progressed, there is no evidence to suggest that the capital account has become more volatile overall.

It appears that capital flows exhibit few regular and systematic relationships and there is little evidence across our sample of countries to suggest that some flows are inherently more conducive to overall stability than others. Hence, the overall stability of the capital account among industrialised economies does not appear to be due to the inherent properties of different types of capital flows and the mix of capital flows underpinning the capital account of these countries. There is tentative evidence that these countries meet certain preconditions that allow them to integrate into global markets more smoothly.[14]


Refer also to Broner and Rigobon (2006), Daude and Fratzscher (2008), Grenville (1998) and Nakagawa and Psalida (2007). [14]