Advanced Search
MyIDEAS: Login to save this article or follow this journal

How important is sound domestic macroeconomics in attracting capital inflows to developing countries?

Contents:

Author Info

  • Graham Bird

    (Surrey Centre for International Economic Studies, University of Surrey, UK)

Abstract

Many developing countries face deficiencies of domestic saving and foreign exchange. With foreign aid declining in real terms it becomes increasingly important to ask what they can do to attract private capital. Without capital inflows, shortages of external financing are likely to constitute an effective constraint on economic development. Within this context a key question is 'how important is it to get the macroeconomics right?'. Can developing countries expect to be rewarded for improved macroeconomic performance by capital inflows? Clearly if they can, there is an additional incentive to seek such improvement. The theoretical and empirical analysis in this paper suggests that there will be no short-run pay-off to improved macroeconomics, beyond a point at which severe macroeconomic disequilibria are eliminated. Whereas there are predictable penalties for getting the macroeconomics badly wrong, there are no equivalently predictable rewards getting it 'right'. In large measure this is the consequence of the ambiguities surrounding what is sound macroeconomics. Macroeconomics is simply too uncertain to encourage investors to attach deterministic weights to indicators of macroeconomic policy and performance. For as long as these uncertainties remain, it is difficult to see how domestic macroeconomics will become a dominant factor in explaining capital flows. Copyright © 1999 John Wiley & Sons, Ltd.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 11 (1999)
Issue (Month): 1 ()
Pages: 1-26

as in new window
Handle: RePEc:wly:jintdv:v:11:y:1999:i:1:p:1-26

Contact details of provider:
Web page: http://www3.interscience.wiley.com/journal/5102/home

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  2. Reinhart, Carmen & Calvo, Sara, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?”," MPRA Paper 7124, University Library of Munich, Germany.
  3. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1995. "The Collapse of the Mexican Peso: What Have We Learned?," NBER Working Papers 5142, National Bureau of Economic Research, Inc.
  4. Garber, Peter M, 1996. "Managing Risks to Financial Markets from Volatile Capital Flows: The Role of Prudential Regulation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 183-95, July.
  5. Fernandez-Arias, Eduardo & Montiel, Peter J, 1996. "The Surge in Capital Inflows to Developing Countries: An Analytical Overview," World Bank Economic Review, World Bank Group, vol. 10(1), pages 51-77, January.
  6. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
  7. Guillermo A. Calvo, 1996. "Capital flows and macroeconomic management: tequila lessons," Working Papers in Applied Economic Theory 96-02, Federal Reserve Bank of San Francisco.
  8. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  9. Assaf Razin & Gian-Maria Milesi-Ferretti, 1996. "Current Account Sustainability," IMF Working Papers 96/110, International Monetary Fund.
  10. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1993. "Is Fixed Investment the Key to Economic Growth?," NBER Working Papers 4436, National Bureau of Economic Research, Inc.
  11. Cardoso, Eliana A. & Dornbusch, Rudiger, 1989. "Foreign private capital flows," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 26, pages 1387-1439 Elsevier.
  12. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  13. International Monetary Fund, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Working Papers 96/9, International Monetary Fund.
  14. Corbo, Vittorio & Hernandez, Leonardo, 1996. "Macroeconomic Adjustment to Capital Inflows: Lessons from Recent Latin American and East Asian Experience," World Bank Research Observer, World Bank Group, vol. 11(1), pages 61-85, February.
  15. Classens, S. & Dooley, M.P. & Warner, A., 1995. "Portfolio Capital Flows: Hot or Cold," Papers 501, Harvard - Institute for International Development.
  16. Daveri, Francesco, 1995. "Costs of entry and exit from financial markets and capital flows to developing countries," World Development, Elsevier, vol. 23(8), pages 1375-1385, August.
  17. Robert Brandon Kahn & Adam Bennett & María Vicenta Carkovic S. & Susan Schadler, 1993. "Recent Experiences with Surges in Capital Inflows," IMF Occasional Papers 108, International Monetary Fund.
  18. Fernandez-Arias, Eduardo, 1996. "The new wave of private capital inflows: Push or pull?," Journal of Development Economics, Elsevier, vol. 48(2), pages 389-418, March.
  19. Corden, W Max, 1993. "Exchange Rate Policies for Developing Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 198-207, January.
  20. Dani Rodrik, 1992. "The Limits of Trade Policy Reform in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 87-105, Winter.
  21. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  22. Chuhan, Punam & Claessens,Constantijn A. & Mamingi, Nlandu, 1993. "Equity and bond flows to Asia and Latin America : the role of global and country factors," Policy Research Working Paper Series 1160, The World Bank.
  23. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
  24. Easterly, William & Schmidt-Hebbel, Klaus, 1993. "Fiscal Deficits and Macroeconomic Performance in Developing Countries," World Bank Research Observer, World Bank Group, vol. 8(2), pages 211-37, July.
  25. D. F. I. Folkerts-Landau & Donald J. Mathieson & Morris Goldstein & Liliana Rojas-Suárez & José Saúl Lizondo & Timothy D. Lane, 1991. "Determinants and Systemic Consequences of International Capital Flows," IMF Occasional Papers 77, International Monetary Fund.
  26. Graham Bird & Dane Rowlands, 1997. "The Catalytic Effect of Lending by the International Financial Institutions," The World Economy, Wiley Blackwell, vol. 20(7), pages 967-991, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bird, Graham, 2001. "IMF Programs: Do They Work? Can They be Made to Work Better?," World Development, Elsevier, vol. 29(11), pages 1849-1865, November.
  2. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
  3. Graham Bird & Dane Rowlands, 2000. "The catalyzing role of policy-based lending by the IMF and the World Bank: fact or fiction?," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(7), pages 951-973.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wly:jintdv:v:11:y:1999:i:1:p:1-26. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.