7 disaggregated by type of capital flow, e.g., bonds (corporate),<sup>equities, and US government</sup> bonds. The total number of subcategories for long-term securities is<sup>7.</sup> In this study we focus on equity and bond flows only and exclude,<sup>for example, sales and</sup> purchases of money market CDs and commercial paper.<sup>8</sup> We correct the bond flows for the issuance of bonds under public debt conversions and the Brady<sup>plan (bonds issued in the debt-</sup> for-debt exchanges as well as any new money bonds) because these<sup>flows do not represent any</sup> voluntary new financing. This adjustment is done by including<sup>dummies for the months of</sup> issuance.<sup>9</sup> Although in principle we aim to model net<sup>capital flows, in this study we focus on</sup> gross bond inflows instead of net bond inflows. We prefer to use<sup>gross bond flows because net</sup> bond flows are influenced by countries' gross purchases<sup>of foreign assets (central banks'</sup> sterilization and other reserve operations, including the repurchases<sup>of the countries' own</sup> .,al obligations). A case in point is Mexico, where<sup>the central bank bought back $7.2</sup> billion of public external debt over the two-year period preceding July<sup>1992, mostly bonds issued</sup> under the 1989 Brady agreement (IMF, 1992b). For<sup>equity flows, on the other hand, we can</sup> correctly study the net flow figures as these are not influenced<sup>by central banks' operations (few</sup> central banks hold non-fixed income securities).

Capital Flow Data The bulk of US equity and bond<sup>flows to developing countries are</sup> concentrated in the 17 countries (Taiwan (China)<sup>is a high-income country) in our sample. In</sup> 1992, these countries' share was 88 percent for gross equities<sup>(97 percent for net equities) and</sup> 74 percent for gross bonds. The US share in total equity<sup>and bond flows to the sample countries</sup> (excluding Taiwan (China)) is likewise large, 67<sup>percent of net equities and 50 percent of bonds</sup> in 1992. The large size of these shares implies that our data<sup>covers a substantial amount of</sup> portfolio flows to developing countries. The US share<sup>in total portfolio flows is much larger</sup> for the Latin American countries than for the Asian<sup>ones, however. As a result, the capital</sup> flows studied here cover a larger percent of overall<sup>capital inflows to Latin America than to</sup> Asia. For selected Latin American and Asian countries,<sup>US gross bond purchases and US net</sup> equity purchases are presented in figures I to 4. Table 2 presents<sup>the annual averages of the two</sup> transactions in bonds not issued by the developing<sup>country in question nor by US entities (e.g.,</sup> US residents would purchase non-Mexican, non-US<sup>bonds from Mexico), but these transactions</sup> are likely to be small, and in any case, likely to be<sup>motivated by the same factors underlying the</sup> trading or issuing of bonds from the developing ceuntry<sup>itself. Data limitations do not allow for</sup> a systematic cross-check, but for countries for which<sup>other data were available the gross iriflow</sup> figures for bonds correspond closely to estimates<sup>from other sources on the amount of new</sup> bonds issued by these countries in the US (on an<sup>annual basis).</sup> OTIC-dat **a** re also collected on other cross-border<sup>claims. Stekler and Truman (1992) draw</sup> attention to some of the Froblems with the TIC-data<sup>as it concerns U.S. nonbank claims on</sup> foreign banks, short-term negotiable instruments<sup>(e.g., commercial paper), and trade-credits</sup> received and extended.

9In our sample, this happened in February 1988 (the so called Mexico-Morgan deal) and March 1990 for Mexico, December 1990 for Venezuela,<sup>and February 1991 for Uruguay.</sup>