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Growing Up with Capital Flows

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  • Ashoka Mody
  • Antu Panini Murshid

Abstract

In a sample of 60 developing countries, we find evidence of a strong-almost one-to-one-relationship between capital inflows and domestic investment. However, this relationship has evolved over time. While growing financial integration with the rest of the world has increased access to foreign private capital, the relationship between foreign capital and domestic investment has weakened, reflecting changes in the composition of inflows, offsetting outflows, and increased foreign-currency reserve requirements. In contrast, better policies have not only brought in more capital but also, especially for foreign direct investment, have tended to strengthen the relationship between foreign capital and domestic investment.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/75.

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Length: 32
Date of creation: 01 Apr 2002
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Handle: RePEc:imf:imfwpa:02/75

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Keywords: Capital inflows; Domestic investment; capital flows; financial integration; foreign capital; capital account liberalization; private capital flows; capital mobility; global development finance; capital outflows; international financial; private capital; foreign capital inflows; international financial statistics; capital inflow; capital controls; capital market; determinants of capital flows; capital flow; capital formation; private flows; exchange rates; external capital; international investment; international finance; international financial crises; capital movements; foreign capital inflow; capital ? outflows; capital account transactions; financial intermediation; international financing; capital flows reversals; commercial bank loans; capital flow volatility; capital stock; external capital flows; capital movement; mixed blessing of capital inflows; international financial regulation; aggregate capital flows; capital accounts; capital flow liberalization; trade shocks; private inflows;

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