# **1. Introduction**

According to conventional wisdom, capital flows are fickle (see e.g. Bluedorn, Duttagupta, Guajardo and Popalova 2013). They are fickle more or less independent of time and place. Having reached this conclusion, analysts then go on and rank different capital flows according to their volatility. Here the consensus is that FDI-related flows are least volatile, while bank-intermediated flows are most volatile. Other portfolio capital flows rank somewhere in between; within this intermediate category debt flows are generally considered to be more volatile than equity-based flows.

This conventional wisdom is a distillation of the experience of earlier decades (see Becker and Noone, 2008 for a survey of the literature in which this experience is reviewed). Yet the structure and regulation of international financial markets continue to change, especially recently. Chinese outward FDI has risen dramatically relative to other sources of FDI, for example, raising the question of whether FDI is equally stable regardless of source. South-South FDI flows have risen more generally, again raising the question of whether they behave in the same relatively stable manner as other FDI flows. Bank-intermediated flows have fallen, as large global banks have deleveraged and curtailed their cross-border operations in response to tighter regulatory oversight, although there is also the question of whether banks in emerging markets have stepped into this market space. Asian bond markets have grown relative to bond markets in other regions, pointing to the question of whether flows into and out of the bond markets of different regions are equally stable. Corporate bond markets have grown relative to sovereign bond markets. International investors have become active in equity markets worldwide.

All this raises the question of whether the conventional wisdom still holds in our contemporary world. Some authors suggest that it may not. Blanchard and Acalin (2016), for example, argue that FDI is now as volatile as portfolio capital flows.

In this paper we revisit these questions, focusing on emerging markets. We ask: how do the magnitude and volatility of various capital flows compare? How have they evolved over time? What are the observable empirical correlates of different flows?

We analyze trends in capital flows since the 1990s, including in the post-global-financialcrisis era. While a majority of previous studies have utilized annual data largely for reasons of availability and convenience, we work here with quarterly data. This allows us to analyze capital flows at business cycle frequencies and around country-specific sudden stops and global stops, events that are hard to pinpoint using annual data.

In terms of inflows into emerging markets, our results suggest that the patterns identified in earlier work persist despite recent structural and regulatory changes, and that much of the conventional wisdom survives. FDI inflows remain more stable than non-FDI inflows: FDI inflows have lower volatility; are more persistent; and decline by smaller amounts in both country-specific sudden stop and global stop episodes. Within non-FDI inflows, portfolio debt and bank2