Abstract：Cross-border capital flows have an important impact on financial stability. Exploring the global and regional co-movements of cross-border capital flows will help to prevent financial risks caused by external shocks. In this paper, we use a multi-level dynamic factor model with time-varying parameters and stochastic volatility to identify the global and regional co-movements of cross-border capital flows. On this basis, we quantify the importance and dynamics of global and regional co-movements of capital flows in explaining capital flows through variance decomposition. The results show that: From the global average level, global and regional co-movements play a decisive role in capital inflow and capital outflow, and the sensitivity of capital flows to external shocks has increased after the 2008 international financial crisis.Global and regional co-movements can explain most of the fluctuations of China's capital flows, and the time-varying characteristics of the sensitivity of capital flows to external shocks are more obvious in China. Further, taking the sum of variance contributions of global and regional co-movements as the sensitivity of capital flows to external shocks, we examine how structural and cyclical variables affect the sensitivity of capital flows to external shocks. The results show that the improvement of domestic structural variables such as financial development level and trade openness can significantly decrease the impact of external shocks on capital flows. The research of this paper provides useful policy enlightenment for improving the management of capital flows and maintaining financial stability in a country.

Keyword：Cross-border Capital Flows; Co-movement; Multi-level Dynamic Factor Model with Time-varying Parameters; External Shocks; Sensitivity;