Honors College Theses

Publication Date



Finance (BBA)

Document Type and Release Option

Thesis (open access)

Faculty Mentor

Axel Grossmann


This paper analyzes the impact of the global financial crisis on cross-border long-term security flows from and towards the U.S. We are investigating monthly observations from 72 countries over the period from 2003 to 2013. The findings show that the global financial crisis impacted all cross-border capital flows in our analysis; yet, the timing, the significance, and the nature of the impact varies among the different securities, as well as between a sample of developed and emerging market countries. We find evidence for a flight-to-safety with the start of the global financial crisis, with a significant, but short lived interruption due to the bankruptcy of Lehman Brothers. Further, the bankruptcy of Lehman Brothers has caused an abrupt drop in holdings of U.S. and foreign equity, which have not recovered ever since. This may suggest that the extraordinary event has caused a general increase in international investors’ risk aversion. Finally, our results do not provide much evidence for the claim made by developing countries’ policymakers that the accommodative monetary policies by the U.S. have caused an overall disruptive capital flow towards their economies.