As capital flows to both advanced and emerging market economies have steadily increased in the past three decades followed by increase in their volatility, understanding the drivers of capital flows and extreme episodes of capital flow has become more important. Highly synchronized extreme episodes of capital flows emphasize the importance of common factors such as global liquidity and global risk. These two variables are usually examined as independent variables, although there are conditions in which high global liquidity can occur concurrently with high global risk and there are also periods where low global liquidity and low global risk intersects.;This dissertation examines the effect of global liquidity and risk on capital flows to emerging economies and whether the relationship changes during easy global liquidity conditions. Using data from 42 emerging economies during 1987 -- 2010, I find that both global liquidity and global risk are important drivers of capital flows, however, the effect of global liquidity easing is smaller during high global risk condition. This result is found to be qualitatively robust using different measurements of global liquidity, surges and reversals. During simultaneous surges or boom periods, the magnitude of surges is significantly higher. Boom are also found to significantly affect the magnitude of portfolio and other inflows.;Specifically on capital surges, I find that surge magnitudes have increased more in recent years and also more synchronized than reversals. Average gross inflows during a simultaneous boom or bust were higher compared to the normal period on average with higher standard deviations. I also examined surge during easy global liquidity conditions and find that the number of surges identified during these periods of easy global conditions are higher and have higher magnitude than under normal liquidity conditions. I find that global factors are the most robust determinant of the likelihood and magnitude of surges, especially global liquidity and global risk, compared to domestic variables. Consequently, the number and magnitude of foreign investor driven surges are found to be higher than other types of surges.
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