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The Composition of Capital Flows

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  • Norbert Funke
  • Faisal Ahmed
  • Rabah Arezki

Abstract

Over the past decade, South Africa has attracted relatively little foreign direct investment (FDI), but considerable amounts of portfolio inflows. In this context, the objective of the paper is twofold: to identify the determinants of the level and composition of capital flows to emerging markets and to draw policy conclusions for South Africa. We estimate a dynamic panel for up to 81 emerging markets using GMM (Generalized Method of Moments) techniques. The results suggest that further trade and capital control liberalization would increase the share of FDI. Additionally, a reduction in exchange rate volatility would affect the composition of capital flows in favor of FDI.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/40.

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Length: 28
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/40

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Keywords: Exchange rates; Foreign investment; fdi; capital flows; capital inflows; direct investment; foreign direct investment; equity flows; capital controls; portfolio investment; determinants of capital flows; foreign investors; equity inflows; capital account restrictions; stock market; capital movements; composition of capital inflows; portfolio investments; domestic credit; stock market capitalization; private capital flows; capital flow; private capital; host country; industrial countries; capital account liberalization; investment decisions; external capital; foreign exchange; capital structure; foreign assets; international capital flows; foreign enterprise; private capital inflows; capital income taxation; capital needs; international capital; international investment; market asset; market size; macroeconomic stability; market access; ratio of imports; capital control; domestic bonds; bond transactions; real effective exchange rate; short-term capital; equity flow; host countries;

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References

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Citations

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Cited by:
  1. Tinashe Harry Dumile Kambadza & Zivanemoyo Chinzara, 2012. "Returns Correlation Structure and Volatility Spillovers Among the Major African Stock Markets," Working Papers 305, Economic Research Southern Africa.
  2. Francesca Giubilo, 2010. "What Could be the Future of South Africa After National Elections on 22 April 2009?," Transition Studies Review, Springer, Springer, vol. 16(4), pages 948-961, February.

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