Unveiling Capital Flow Dynamics: Beyond the Traditional Business Cycle
Economists traditionally distinguish between long-term structural trends and short-term business-cycle fluctuations. This paper argues that, for capital flows, this dichotomy misses a key source of macrofinancial vulnerability: medium-term imbalances that are neither structural nor merely temporary. Using gross non-resident portfolio inflows, we decompose deviations from a structural benchmark into business-cycle and medium-term components.