intermediated flows remain the most volatile. Bank-intermediated flows, which rose in the mid2000s, are especially volatile. They decline most sharply during country-specific sudden stops and global stop episodes. These results may not be surprising, but their constancy is surprising. Empirical regularities in international finance that stand the test of time are the exception, not the rule.

But outflows from emerging markets behave differently. In contrast to the findings for inflows, we document important changes since the turn of the century and in the most recent decade, in particular, in the behavior of outflows. FDI outflows from emerging markets have grown and become significantly more volatile. Similarly, there is a significant increase in the volatility of “other” (mainly bank-intermediated) capital outflows from emerging markets since the turn of the century. Those other outflows are twice as volatile again as FDI outflows, as measured by the coefficient of variation of gross flows scaled by GDP, in the most recent period, 2011-2015. In terms of shocks to the capital account of the balance of payments, our findings underscore that outflows from emerging markets, both FDI and bank-related flows, have come to play a growing role and deserve greater attention from analysts and policy makers.

# **2. Literature Review**

The majority of previous papers in this area use annual data, as noted above, typically from 1980 through the early- to mid-2000s. Recent contributions tend to focus on gross flows rather than netting inflows and outflows. An example is Bluedorn et al (2013). Working with annual data on gross flows since 1980 for a sample of 150 advanced, emerging and developing countries, they argue that capital flows are volatile for all countries (advanced and emerging) and across all points in time. Flows exhibit low persistence regardless of country and type. Flows into emerging markets in particular rise when global financing conditions are relatively easy.

Levchenko and Mauro (2007) are another good example of the genre. Using annual data on gross flows for a panel of 142 advanced, emerging, and developing economies over the period 1970–2003, they find that FDI is the least volatile form of capital flows. Defining sudden stops as the episodes when the reversal in total financial flows is more than 5 percentage points of GDP compared with the previous year, they show that FDI remains relatively stable during sudden stops. Although portfolio equity flows seem to play a limited role in sudden stops as well, portfolio debt flows experience a reversal, although they recover relatively quickly after the sudden stop. Bankrelated flows experience sharpest drops and typically remain depressed for several years.

Broner et al (2013) similarly use annual data on gross flows for 103 countries (mostly high income and middle income countries) over the period 1970–2009. They find a high correlation between inflows and outflows; both inflows and outflows decline during crises, and both are procyclical. They also note that the magnitude of both outflows and inflows has increased. They conclude that inflows and outflows have both become more volatile over the years, even as net flows and their volatility have remained broadly unchanged.

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