This paper first shows that capital inflows to and outflows from financial centers were disproportionately affected by the global financial crisis. Switzerland was no exception. The paper then identifies waves of capital flows to and from Switzerland from 2000:Q1 to 2014:Q2 by using a simple statistical method. The analysis shows that private capital inflows to and outflows from Switzerland have become exceptionally muted and less volatile since the crisis. Further, strong and long-lasting ‘home bias’ behavior can be observed for both Swiss and foreign investors. By contrast, net private capital flows have shown significantly higher volatility since the financial crisis, frequently registering extreme movements driven by extreme movements in bank lending flows. These findings suggest that the financial crisis generated a breaking point for capital flows to and from Switzerland.
Ahmed, Shaghil, and Andrei Zlate (2014), “Capital Flows to Emerging Market Economies: A Brave New World?”, Journal of International Money and Finance, 48(B), pp. 221–248.
Bluedorn, John, Rupa Duttagupta, Jaime Guajardo, and Petia Topalova (2013), “Capital Flows Are Fickle: Anytime, Anywhere”, IMF Working Paper, No. 13/183, International Monetary Fund.
Broner, Fernando, Tatiana Didier, Aitor Erce, and Sergio L. Schmukler (2013), “Gross Capital Flows: Dynamics and Crisis”, Journal of Monetary Economics, 60(1), pp. 113–133.
Calvo, Guillermo (1998), “Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops”, Journal of Applied Economics, 1(1), pp. 35–54.
Cardarelli, Roberto, Selim Elekdag, and M. Ayhan Kose (2010), “Capital Inflows: Macroeconomic Implications and Policy Responses”, Economic Systems, 34(4), pp. 333–356.
Forbes, Kristin J., and Francis E. Warnock (2012a), “Capital Flow Waves: Surges, Stops, Flight, and Retrenchment”, Journal of International Economics, 88(2), pp. 235–251.
Forbes, Kristin J., and Francis E. Warnock (2012b), “Debt- and Equity-Led Capital Flow Episodes”, NBER Working Paper Series, No 18329, National Bureau of Economic Research.
Furceri, Davide, Stéphanie Guichard, and Elena Rusticelli (2012), “The Effect of Episodes of Large Capital Inflows on Domestic Credit”, The North American Journal of Economics and Finance, 23(3), pp. 325–344.
Ghosh, Atish R., Mahvash S. Quereshi, Jun Il Kim, and Juan Zalduendo (2014), “Surges”, Journal of International Economics, 92(2), pp. 266–285.
Kraay, Aart, Norman Loayza, Luis Servén, and Jaume Ventura (2005), “Country Portfolios”, Journal of the European Economic Association, 3(4), pp. 914–945.
Lane, Philip (2013), “Capital Flows in the Euro Area”, CEPR Discussion Paper Series, No. 9493.
Lane, Philip R., and Gian Maria Milesi-Ferretti (2007), “Capital Flows to Central and Eastern Europe”, Emerging Markets Review, 8(2), pp. 106–123.
Milesi-Ferretti, Gian Maria, and Cedric Tille (2011), “The Great Retrenchment: International Capital Flows during the Global Financial Crisis”, Economic Policy, 26(66), pp. 285–342.
Powell, Andrew, and Pilar Tavella (2012), “Capital Inflow Surges in Emerging Economies: How Worried should LAC Be?”, IDB Working Paper Series, No. IDB-WP-326, Inter-American Development Bank.
Reinhart, Carmen M., and Vincent R. Reinhart (2008), “Capital Flow Bonanzas: An Encompassing View of the Past and Present”, NBER Working Paper Series, No. 14321, National Bureau of Economic Research.
Tillmann, Peter (2013), “Capital Inflows and Asset Prices: Evidence from Emerging Asia”, Journal of Banking and Finance, 37(3), pp. 717–729.
I thank two anonymous referees, Adrien Alvero, Katrin Assenmacher, Irineu de Carvalho Filho, Andreas Fischer, Christian Grisse, seminar participants at the Swiss National Bank, and conference participants at the 2013 Conference of the Swiss Society of Economics and Statistics in Neuchatel and at the 2014 INFINITI conference on International Finance in Prato for their helpful comments and discussions. I also thank Adrien Alvero, Elisabeth Beusch, Elodie Moreau, and Laurence Wicht, who provided excellent research assistance at various stages of this project. Any remaining errors are my own. The views expressed in this paper are those of the author and do not represent those of the Swiss National Bank.
About this article
Cite this article
Yeşin, P. Capital Flow Waves to and from Switzerland before and after the Financial Crisis. Swiss J Economics Statistics 151, 27–75 (2015). https://doi.org/10.1007/BF03399413
- private capital flows