Date of Award
Bachelor of Arts
This paper studies the determinants of portfolio capital flows to emerging Europe along with the spillover effects of U.S. monetary policy on the region’s portfolio investment inflows. Using a sample of eleven emerging European countries over the period from 2000Q1 to 2018Q3, this paper employs five fixed-effects regressions that include combinations of exogenous push and domestic structural pull factors as explanatory variables for portfolio flows to emerging Europe. My results suggest that U.S. monetary policy is only a secondary driver of portfolio equity flows to the region and rather domestic factors including capital inflow restrictions, institutional quality, and Eurozone membership are the most significant and consistent determinants. This paper contributes to the existing literature by not only studying emerging Europe as a whole, but also differentiating between Emerging and Frontier Market economies. I found that again especially for Frontier Markets domestic variables were the main drivers of portfolio inflows, but U.S. monetary policy and expected GDP growth differentials were also significant in driving investments into European Emerging Market economies.
Maier, Dennis, "Different or the Same? The Spillover Effects of U.S. Monetary Policy and Determinants of Portfolio Capital Inflows to Emerging and Frontier Economies: Evidence from Emerging Europe" (2019). Economics Student Theses and Capstone Projects. 109.