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The Impact of Economic Uncertainty and Risk Aversion on the Transnational Capital Flow:Based on an Empirical Study in South Korea
Pages: 22-32
Year: Issue:  4
Journal: Nankai Journal(Philosophy,Literature and Social Science Edition)

Keyword:  Capital FlowsEconomic UncertaintyRisk AversionSouth Korea;
Abstract: After the 2008 global financial crisis, the attitudes of scholars and policymakers on transnational capital flows have shifted from free flow to moderate regulation. It is important to understand the capital driving-factors to lead and regulate efficiently the capital flow. By analyzing the effects of economic uncertainty and risk aversion on short-term and long-term capital flows in South Korea, we found that uncertainty and risk aversion have an important impact on both the long-term and the short-term capital flows, especially on the short-term capital flows. Moreover, the impacts of uncertainty and risk aversion on capital flows are different, sometimes even opposite. Therefore, when the transnational capital is being regulated, not only relevant macro-prudential policies should be adopted, but also sufficient attention should be paid to the changes of the attitudes toward economic uncertainty and risk-aversion. Finally, it is also important to distinguish the difference between the effects of economic uncertainty and risk aversion to lead and adjust these unpredictable economic factors.
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