Global uncertainties and portfolio flow dynamics of the BRICS countries

Oğuzhan Çepni; Selçuk Gül; Yavuz Selim Hacıhasanoğlu; Muhammed Hasan Yılmaz

doi:10.1016/j.ribaf.2020.101277

Global uncertainties and portfolio flow dynamics of the BRICS countries

Res Int Bus Finance. 2020 Dec:54:101277. doi: 10.1016/j.ribaf.2020.101277. Epub 2020 Jul 3.

Authors

Oğuzhan Çepni¹, Selçuk Gül¹, Yavuz Selim Hacıhasanoğlu¹, Muhammed Hasan Yılmaz¹

Affiliation

¹ Central Bank of the Republic of Turkey, Ankara, Turkey.

Abstract

This paper investigates the dynamics of bond and stock market capital flows to BRICS countries under uncertainties such as global economic policy uncertainty and the US trade policy uncertainty. We use a time-varying Granger causality framework over the January 2008-November 2019 period to analyze the predictive power of uncertainties on capital flows in the form of bond and equity. The results show that the effects are heterogeneous across countries and stronger during the Global Financial Crisis period and post-2018 period while it lost its significance in the subsequent period. The negative influence of uncertainties on capital flows directed to BRICS countries is also evident in the results of non-parametric time-varying panel models. Overall, it is thought that the heterogeneous structure of the causality between uncertainty and portfolio flows into BRICS may present portfolio diversification benefits for global investors.

Keywords: Economic policy uncertainty; The US trade policy uncertainty; Time-varying causality; Time-varying coefficients panel data models.