New York Economic Review


Capital Flows to Russia, Ukraine, and Belarus: Does "Hot" Money Respond Differently to Macroeconomic Shocks?

Scott W. Hegerty

vol. 42, Fall 2011, p. 47-62


Capital flows into the former Soviet bloc have increased tremendously since the mid-1990s. Since the new members of the European Union have received most of the attention, few empirical studies have looked at Russia or the rest of the CIS. This study applies the structural VAR model of Ying and Kim (2001) to investigate the macroeconomic "push" and "pull" factors behind net flows of FDI, portfolio, and other investment into Russia, Ukraine and Belarus. Impulse-response and variance decomposition analysis shows that domestic income and monetary shocks, as well as foreign income and interest-rate shocks, have effects that vary by flow and by country. Russian FDI and portfolio investment show significant, but different, responses to income and foreign interest-rate shocks. In addition, Belarus responds positively to improved macroeconomic fundamentals.


suggested citation:

Scott W. Hegerty. "Capital Flows to Russia, Ukraine, and Belarus: Does 'Hot' Money Respond Differently to Macroeconomic Shocks?." New York Economic Review. vol. 42, Fall 2011, p. 47-62

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