Financial Openness And Capital Inflows To Emerging Markets In Search Of Robust Evidence

Author : Diego A. Cerdeiro,Andras Komaromi
Publisher : International Monetary Fund
Page : 32 pages
File Size : 51,5 Mb
Release : 2019-09-13
Category : Business & Economics
ISBN : 9781513509839

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Financial Openness and Capital Inflows to Emerging Markets: In Search of Robust Evidence by Diego A. Cerdeiro,Andras Komaromi Pdf

We reassess the connection between capital account openness and capital flows in an empirical framework that is grounded in theory and makes use of previously unexplored variation in the data. We demonstrate how our theory-consistent regressions may overcome some ubiquitous measurement problems in the literature by relying on interaction terms between financial openness and traditional push-pull factors. Within our proposed framework, we ask: what can be said robustly about the effect of capital account restrictions on capital flows? Our results warrant against over-interpreting the existing cross-country evidence as we find very few robust relationships between capital account restrictiveness and various types of capital inflows. Countries with a higher degree of financial openness are more susceptible to some, but by no means all, push and pull factors. Overall, the results are still consistent with a complex set of tradeoffs faced by policymakers, where the ability to shield the domestic economy from volatile capital flow cycles must be weighed against the sources of exogenous risks and potential long run growth effects.

Author : Mrs.Sarwat Jahan,Daili Wang
Publisher : International Monetary Fund
Page : 26 pages
File Size : 51,8 Mb
Release : 2016-12-23
Category : Business & Economics
ISBN : 9781475563191

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Capital Account Openness in Low-income Developing Countries by Mrs.Sarwat Jahan,Daili Wang Pdf

The relevance of recording and assessing countries’ capital flow management measures is well-recognized, but very few studies have focused on low-income developing countries (LIDCs). A key constraint is the lack of an appropriate index to measure the openness of capital account and its change over time. This paper fills the gap by constructing a de jure index based on information contained in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. It provides an aggregate index to capture the overall openness of the capital account, and also provides a breakdown of openness for various subcategories of capital flows. The new database covers 164 countries with information on 12 types of asset categories over the period 1996–2013. The index provides the largest coverage of LIDCs among all existing indices and also provides granularity on openness across asset types, direction of flows and residency. The paper examines the link between de jure capital account openness with de facto capital flows and outlines potential applications of this database.

Author : Mr.Thierry Tressel,Dennis B. S. Reinhardt,Mr.Luca Antonio Ricci
Publisher : International Monetary Fund
Page : 46 pages
File Size : 53,8 Mb
Release : 2010-10-01
Category : Business & Economics
ISBN : 9781455209354

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International Capital Flows and Development by Mr.Thierry Tressel,Dennis B. S. Reinhardt,Mr.Luca Antonio Ricci Pdf

Does capital flow from rich to poor countries? We revisit the Lucas paradox and explore the role of capital account restrictions in shaping capital flows at various stages of economic development. We find that, when accounting for the degree of capital account openness, the prediction of the neoclassical theory is confirmed: less developed countries tend to experience net capital inflows and more developed countries tend to experience net capital outflows, conditional of various countries’ characteristics. The findings are driven by foreign direct investment, portfolio equity investment, and to some extent by loans to the private sector.

Author : Swarnali Ahmed Hannan
Publisher : International Monetary Fund
Page : 26 pages
File Size : 49,6 Mb
Release : 2017-03-10
Category : Business & Economics
ISBN : 9781475586121

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The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis by Swarnali Ahmed Hannan Pdf

Using a sample of 34 emerging markets and developing economies over the period 2009Q3-2015Q4, the paper employs a panel framework to study the determinants of capital flows, both net and gross, across a wide range of instruments. The baseline regressions are then extended to focus on high and low episodes – quarters with flows one standard deviation above/below mean. Overall, the results suggest that the capital flow slowdown witnessed in recent years is due to a combination of lower growth prospects of recipient countries and worse global risk sentiment. However, the determinants of flows can be considerably different across instruments and across the type of flows considered, net or gross. The sensitivity of certain types of flows, towards push and pull factors, increases during periods of high and low capital flows. Moreover, some variables may not necessarily be significant during normal times, but can be important drivers during such episodes, and vice versa. Indicators like the gap between the U.S. long- and short-term maturity bond yields – not significant during normal times – can be an important driver during high episodes.

Author : Sunil Sharma,Woon Gyu Choi,Maria Strömqvist
Publisher : International Monetary Fund
Page : 42 pages
File Size : 42,5 Mb
Release : 2007-07
Category : Business & Economics
ISBN : UCSD:31822034969436

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Capital Flows, Financial Integration, and International Reserve Holdings by Sunil Sharma,Woon Gyu Choi,Maria Strömqvist Pdf

This paper examines the interaction between capital flows and international reserve holdings in the context of increasing financial integration. For emerging markets the sensitivity of reserves to net capital flows was negative in the 1980s, but became positive after the Asian crisis when these countries used net capital flows to build up reserves. For advanced countries, net capital flows had a negative effect on reserves, especially in recent years. Using measures of financial globalization, we also provide evidence that the sensitivity of reserves to net capital flows increased with globalization for emerging markets while it decreased for advanced countries.

Author : Ms.Deniz O Igan,Ali M. Kutan,Ali Mirzae
Publisher : International Monetary Fund
Page : 50 pages
File Size : 55,8 Mb
Release : 2016-12-06
Category : Business & Economics
ISBN : 9781475558562

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Real Effects of Capital Inflows in Emerging Markets by Ms.Deniz O Igan,Ali M. Kutan,Ali Mirzae Pdf

We examine the association between capital inflows and industry growth in a sample of 22 emerging market economies from 1998 to 2010. We expect more external finance dependent industries in countries that host more capital inflows to grow disproportionately faster. This is indeed the case in the pre-crisis period of 1998–2007, and is driven by debt, rather than equity, inflows. We also observe a reduction in output volatility but this association is more pronounced for equity, rather than debt, inflows. These relationships, however, break down during the crisis, hinting at the importance of an undisrupted global financial system for emerging markets to harness the growth benefits of capital inflows. In line with this observation, we also document that the inflows-growth nexus is stronger in countries with well-functioning banks.

Author : Swarnali Ahmed Hannan
Publisher : International Monetary Fund
Page : 22 pages
File Size : 52,7 Mb
Release : 2018-09-28
Category : Business & Economics
ISBN : 9781484378281

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Revisiting the Determinants of Capital Flows to Emerging Markets--A Survey of the Evolving Literature by Swarnali Ahmed Hannan Pdf

This paper documents the evolution of gross and net capital flows to emerging market economies and surveys the large literature on the potential drivers. While the capital flow landscape has been shaped by the evolution of both global and country-specific factors, the relative importance of these factors has varied over time and differs depending on the type of capital flows. The findings from the survey of the literature thus underscores the importance of policies in both source and recipient countries in shaping capital flows.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 87 pages
File Size : 45,6 Mb
Release : 2003-12-02
Category : Business & Economics
ISBN : 9781498329835

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Effects of Financial Globalization on Developing Countries - Some Empirical Evidence by International Monetary Fund Pdf

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Author : Mr.Eugenio Cerutti,Mr.Stijn Claessens,Mr.Damien Puy
Publisher : International Monetary Fund
Page : 43 pages
File Size : 41,6 Mb
Release : 2015-06-22
Category : Business & Economics
ISBN : 9781513526638

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Push Factors and Capital Flows to Emerging Markets by Mr.Eugenio Cerutti,Mr.Stijn Claessens,Mr.Damien Puy Pdf

This paper analyzes the behavior of gross capital inflows across 34 emerging markets (EMs). We first confirm that aggregate inflows to EMs co-move considerably. We then report three findings: (i) the aggregate co-movement conceals significant heterogeneity across asset types as only bank-related and portfolio bond and equity inflows do co-move; (ii) while global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow; and (iii) the sensitivity to common dynamics varies significantly across borrower countries, with market structure characteristics (especially the composition of the foreign investor base and the level of liquidity) rather than borrower country’s institutional fundamentals strongly affecting sensitivities. Countries relying more on international funds and global banks are found to be more sensitive to push factors. Our findings suggest that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors.

Author : Diego A. Cerdeiro,Andras Komaromi
Publisher : International Monetary Fund
Page : 32 pages
File Size : 52,8 Mb
Release : 2019-09-13
Category : Business & Economics
ISBN : 9781513515090

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Financial Openness and Capital Inflows to Emerging Markets: In Search of Robust Evidence by Diego A. Cerdeiro,Andras Komaromi Pdf

We reassess the connection between capital account openness and capital flows in an empirical framework that is grounded in theory and makes use of previously unexplored variation in the data. We demonstrate how our theory-consistent regressions may overcome some ubiquitous measurement problems in the literature by relying on interaction terms between financial openness and traditional push-pull factors. Within our proposed framework, we ask: what can be said robustly about the effect of capital account restrictions on capital flows? Our results warrant against over-interpreting the existing cross-country evidence as we find very few robust relationships between capital account restrictiveness and various types of capital inflows. Countries with a higher degree of financial openness are more susceptible to some, but by no means all, push and pull factors. Overall, the results are still consistent with a complex set of tradeoffs faced by policymakers, where the ability to shield the domestic economy from volatile capital flow cycles must be weighed against the sources of exogenous risks and potential long run growth effects.

Author : Mr.Ayhan Kose,Mr.Kenneth Rogoff,Mr.Eswar Prasad,Shang-Jin Wei
Publisher : International Monetary Fund
Page : 68 pages
File Size : 45,8 Mb
Release : 2003-09-03
Category : Business & Economics
ISBN : 1589062213

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Effects of Financial Globalization on Developing Countries by Mr.Ayhan Kose,Mr.Kenneth Rogoff,Mr.Eswar Prasad,Shang-Jin Wei Pdf

This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.

Author : Juliana Dutra Araujo,Mr.Antonio David,Carlos van Hombeeck,Mr.Chris Papageorgiou
Publisher : International Monetary Fund
Page : 42 pages
File Size : 46,8 Mb
Release : 2015-07-17
Category : Business & Economics
ISBN : 9781513508146

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Joining the Club? Procyclicality of Private Capital Inflows in Low Income Developing Countries by Juliana Dutra Araujo,Mr.Antonio David,Carlos van Hombeeck,Mr.Chris Papageorgiou Pdf

Using a newly developed dataset this paper examines the cyclicality of private capital inflows to low-income developing countries (LIDCs) over the period 1990-2012. The empirical analysis shows that capital inflows to LIDCs are procyclical, yet considerably less procyclical than flows to more advanced economies. The analysis also suggests that flows to LIDCs are more persistent than flows to emerging markets (EMs). There is also evidence that changes in risk aversion are a significant correlate of private capital inflows with the expected sign, but LIDCs seem to be less sensitive to changes in global risk aversion than EMs. A host of robustness checks to alternative estimation methods, samples, and control variables confirm the baseline results. In terms of policy implications, these findings suggest that private capital inflows are likely to become more procyclical as LIDCs move along the development path, which could in turn raise several associated policy challenges, not the least concerning the reform of traditional monetary policy frameworks.

Author : Dennis Reinhardt,Luca Antonio Ricci,Thierry Tressel
Publisher : Unknown
Page : 128 pages
File Size : 47,8 Mb
Release : 2013
Category : Electronic
ISBN : OCLC:851540702

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International Capital Flows and Development by Dennis Reinhardt,Luca Antonio Ricci,Thierry Tressel Pdf

Author : Tahsin Saadi Sedik,Tao Sun
Publisher : INTERNATIONAL MONETARY FUND
Page : 27 pages
File Size : 48,7 Mb
Release : 2012-11-16
Category : Business & Economics
ISBN : 9781475547276

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Effects of Capital Flow Liberalization—What is the Evidence from Recent Experiences of Emerging Market Economies? by Tahsin Saadi Sedik,Tao Sun Pdf

This paper analyzes the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows is associated with higher growth, gross capital flows, and equity returns and with lower inflation and bank capital adequacy ratios. The effects vary depending on thresholds. As a potential application of these findings, the paper explores the possible effects of liberalization on China by applying the coefficients of explanatory variables to the corresponding variables of China in 2012–16.

Author : Masahiro Kawai,Mario B. Lamberte
Publisher : Edward Elgar Publishing
Page : 465 pages
File Size : 46,7 Mb
Release : 2010-01-01
Category : Business & Economics
ISBN : 9781849806879

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Managing Capital Flows by Masahiro Kawai,Mario B. Lamberte Pdf

Managing Capital Flows provides analyses that can help policymakers develop a framework for managing capital flows that is consistent with prudent macroeconomic and financial sector stability. While capital inflows can provide emerging market economies with invaluable benefits in pursuing economic development and growth, they can also pose serious policy challenges for macroeconomic management and financial sector supervision. The expert contributors cover a wide range of issues related to managing capital flows and analyze the experience of emerging Asian economies in dealing with surges in capital inflows. They also discuss possible policy measures to manage capital flows while remaining consistent with the goals of macroeconomic and financial sector stability. Building on this analysis, the book presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Containing chapters that bring in international experiences relevant to Asia and other emerging market economies, this insightful book will appeal to policymakers in governments and financial institutions, as well as public and private finance experts. It will also be of great interest to advanced students and academic researchers in finance.