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What drives the capital flows into BRICS economies?

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  • Vighneswara Swamy
  • Vijayakumar Narayanamurthy

Abstract

Understanding what drives the capital flows has important policy implications for countries in managing the direction and magnitude of such flows. This paper empirically investigates the main drivers of capital flows into the fast†growing BRICS countries, in the backdrop of their growing inward capital flows. Employing a fully balanced panel for the period 1995–2015, we focus on, among others, the hitherto commonly untested variables: sovereign credit ratings, economic freedom and ease of doing business ranking of these countries. In searching for the relevant interaction and causality among the drivers of capital flows, we employ the panel Granger causality test to arrive at the policy implications. The results suggest that market size is a significant driver of capital flows. In addition to infrastructure, economic freedom in the host countries, ease of doing business ranking and sovereign credit ratings are the main drivers in the long†run growth of capital flows.

Suggested Citation

  • Vighneswara Swamy & Vijayakumar Narayanamurthy, 2018. "What drives the capital flows into BRICS economies?," The World Economy, Wiley Blackwell, vol. 41(2), pages 519-549, February.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:2:p:519-549
    DOI: 10.1111/twec.12606
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    Cited by:

    1. Hui Shan Lee & Shyue Chuan Chong & Shen Yap & Bik Kai Sia & Ying Xi Chen, 2021. "Does Economic Freedom in Host Countries Lead to Increased Non-Life Insurance Development?," SAGE Open, , vol. 11(4), pages 21582440211, October.
    2. P. K. Mishra & S. K. Mishra, 2022. "Is the Impact of COVID-19 Significant in Determining Equity Market Integration? Insights from BRICS Economies," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 137-162, May.
    3. Çepni, Oğuzhan & Gül, Selçuk & Hacıhasanoğlu, Yavuz Selim & Yılmaz, Muhammed Hasan, 2020. "Global uncertainties and portfolio flow dynamics of the BRICS countries," Research in International Business and Finance, Elsevier, vol. 54(C).
    4. Luitel, Prabesh & Vanp�e, Rosanne, 2018. "How do sovereign credit ratings help to financially develop low-developed countries?," ECMI Papers 13956, Centre for European Policy Studies.
    5. Vighneswara Swamy & Munusamy Dharani, 2020. "Thresholds of financial development in the Euro area," The World Economy, Wiley Blackwell, vol. 43(6), pages 1730-1774, June.

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