International gross capital flows: New uses of balance of payments data and application to financial crises

Publication Title

Journal of Policy Modeling

Document Type


Department or Program


Publication Date



Balance of payments crises, Capital flows, External crises, Financial integration


Most studies of international financial openness and crises link economic performance to either the net inflow of capital or the gross inflow (outflow) defined as the change in foreign (domestic) holdings of domestic (foreign) assets over a period. In this paper we decompose the net inflow into four rather than two components. We show that the four-way decomposition provides a better understanding of six recent financial crises and predicts sudden stops better than a standard two-way decomposition. We conclude that four-way decompositions can be more informative than either the net capital inflow or two-way decompositions of the net inflow. © 2012 Society for Policy Modeling.

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