Global Risk Appetite, US EconomicPolicy Uncertainties and Cross-BorderCapital Flow

摘要

Based on the global asset portfolio model, this paper created a panel thresholdmodel using EPFR fund data to empirically test the non-linear spillover effects of USeconomic policy uncertainties on cross-border capital flow for emerging economies. Ourstudy led to the following findings: (1) When the level of global investor risk tolerance ishigh, rising US EPU will induce a capital inflow into emerging economies, as manifestedin the “portfolio rebalancing effect.” When the level of global investor risk tolerance isbelow a critical threshold, this gives rise to risk aversion and emerging economies willexperience net capital outflow, i.e. the “flight to quality effect”. (2) Equity fund investorshave a lower risk tolerance threshold than bond fund investors. (3) According to ourheterogeneity analysis, more attention should be paid to monitoring capital flow throughactively managed funds, ETF funds, and retail investor funds. The economy should increasefinancial efficiency and economic resiliency to mitigate capital outflow pressures from theexternal environment.