Considering the above, this paper analyses the dynamics of gross capital flows since the 1990s across three regions of EMs as well as across types of capital flows. Most prior studies in the field, as reviewed by Koepke (2015) have discussed EMs as one group, which conceals potential differences in the dynamics of capital flows across the regions as well as across types of capital flows. We are interested in the possible regional diversities in capital flow dynamics as well as in roles played by both domestic and global factors that potentially contribute to the dynamics.

First, we demonstrate and confirm distinct features of gross capital inflows and outflows with selected EMs across three regions, i.e. East Asia, Europe and Latin America by types of capital flows, i.e. foreign direct investment (FDI), portfolio equity flows, portfolio debt flows and other investment. For example, FDI has played a major role in inflow trend throughout the three regions and in the inflow swing in Europe. Other investments including bank loans have played varying roles over time and across the regions, reflecting regional historical developments while portfolio equity and debt flows have been relatively less important.

Using panel data regression for these EMs in the period of 2000-2015, we show how both domestic and global factors contribute to the dynamics of these gross capital flows across the regions and the capital flow types. We confirm that both global factors such as expected growth and international investors’ risk perception in AEs, and domestic factors such as exchange rate regimes, and financial deepening in EMs, contribute to capital flow dynamics in EMs. Furthermore, we detect significant regional diversities of relative importance as well as relative sensitivities in the roles of these domestic and global factors.