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Volatility of short term capital flows, financial anarchy and private investment in emerging markets

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Author Info
Demir, Firat

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Abstract

Using micro-level panel data, the paper analyses the impacts of short-term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets that are Argentina, Mexico and Turkey. The empirical results including comprehensive sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms. Accordingly, a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1-1.7, 2.3-15.1, and 1 per cent in Argentina, Mexico and Turkey respectively.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3080.

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Date of creation: Oct 2006
Date of revision: May 2007
Handle: RePEc:pra:mprapa:3080

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Related research
Keywords: Capital Flow Volatility; Macroeconomic Uncertainty; Private Investment; Financial Liberalisation;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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