Uncertainty and episodes of extreme capital flows in the Euro Area
During the Euro Area crisis contractions in international capital flows occurred along with a high level of economic uncertainty. While both factors are able to trigger or amplify economic shocks posing a threat for economic activity, it is a natural question whether they are related. The aim of this paper is to analyse the link between different measures of uncertainty and episodes of extreme capital flows for the EMU-12 countries using gross capital flows. We find that country-specific risk factors seem to play an important role in indicating periods of extreme capital flows. Moreover, country-specific uncertainty seems to be more relevant for foreign direct investors and for those in stressed countries of the Euro Area.
Schmidt, T. und L. Zwick (2015), Uncertainty and episodes of extreme capital flows in the Euro Area. Economic Modelling, 48, 343-356