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Working Paper 2008-042B

"Do European Capital Flows Comove?"
by Silvio Contessi, and Pierangelo DePace

We study the cross-section correlations of net, total, and disaggregated capital flows for the major source and recipient European Union countries. We seek evidence of changes in these correlations since the introduction of the euro to understand whether the European Union can be considered a unique entity with regard to its international capital flows. We make use of Ng's (2006) “uniform spacing" methodology to rank cross-section correlations and shed light on potential common factors driving international capital flows. We find that a common factor structure is suitable for equity flows disaggregated by sign but not for net and total flows. We only find mixed evidence that correlations between types of flows have changed since the introduction of the euro.

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Category > Applied Econometrics
Category > International
Author > Silvio Contessi
Research Papers and Publications: JEL Code > F32
Research Papers and Publications: JEL Code > F34
Research Papers and Publications: JEL Code > F36