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Bilateral Portfolio Dynamics During the Global Financial Crisis

Vahagn Galstyan, IIIS, Trinity College Dublin
Philip R. Lane, IIIS, Trinity College Dublin and CEPR

IIIS Discussion Paper No. 366


Abstract
There has been considerable bilateral variation in the pattern of portfolio capital flows during the global financial crisis: for a given destination, investors from different countries adjusted their holdings to different degrees. We show that the size of the initial bilateral holding, geographical distance, common language, the level of trade and common institutional linkages help to explain the pattern of adjustment. These bilateral factors are more important for equities than for bonds and for investors from developing countries than for investors from advanced countries.


Keywords: International capital flows, International portfolios, External adjustment
JEL classification: F30, F41, G15


Last updated 28 August 2014 by IIIS (Email).