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Determinants of Investment Flows into Emerging Markets

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Author Info
Carlos Andrés Amaya ()
Peter Rowland ()
Abstract

The understanding of foreign investment flows is important for emerging market policy makers, since such flows make up a considerable part of the balance of payments, and since such flows tend to be very volatile. Sudden stops or reversals of investment flows have, indeed, played an important part in recent emerging market crises. This paper presents a study of emerging market investment flows and their determinants. Using first a relatively simple cross-country framework to study investment flows in the year 2000 and then a panel-data framework to study such flows for the time period 1980 to 1997, a number of variables emerge as significant in determining investment flows. In general, large open economies with a high growth rate attract more flows than small closed economies with a sluggish growth rate. In addition, the results suggest that sound fiscal policies together with moderate debt levels results in higher levels of foreign investment. The business cycle in the developed countries also has an impact on such flows.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 313.

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Handle: RePEc:bdr:borrec:313

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Related research
Keywords: Foreign direct investment; portfolio investment; developing countries;

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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    Other versions:
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This page was last updated on 2009-11-20.

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