Extreme Capital Flow Episodes From the Global Financial Crisis to COVID-19: An Exploration With Monthly Data

The COVID-19 pandemic triggered major disruptions in international capital flows, the latest of several extreme episodes since the global financial crisis (GFC). This paper presents a new monthly dataset of gross capital flows for 47 countries, available publicly and updated quarterly, that is better suited to the identification of sudden shocks than quarterly Balance of Payments data. Leveraging on this dataset, we revisit the occurrence and drivers of extreme episodes since the GFC, asking whether COVID-19 significantly changed recent findings of a weaker role of global factors. The answer is no. Rather, the exceptional spikes in global factors during the initial stages of COVID should have predicted many more sudden stops than experienced. Instead, pull factors such as pre-COVID vulnerabilities and pandemic-specific factors appear key in explaining the identified cross-country heterogeneity.