Advanced Search
MyIDEAS: Login

A Survey of the Econometric Literature on the Real Effects of International Capital Flows in Lower Income Countries

Contents:

Author Info

  • J Benson Durham

Abstract

This review examines the empirical literature on financial flows and economic performance, with particular respect to foreign direct investment (FDI), foreign portfolio investment (FPI), and foreign bank lending (FBL). Few studies report unequivocal positive statistical relations between flows and performance. Instead, even generally benevolent perspectives on liberalisation suggest that lower income countries should exhibit sufficient 'absorptive capacity' vis-à-vis variables such as the initial level of income, education, or trade openness. Notably, lower income countries are less likely to meet such 'thresholds'. But, before drawing definitive conclusions, shortcomings beset inference from existing studies. For example, the literature ignores the initial level of financial development in host countries, a potentially important intervening variable. Also, previous results likely suffer from specification bias, as few studies produce a standard set of control variables.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www3.qeh.ox.ac.uk/RePEc/qeh/qehwps/qehwps50.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Queen Elizabeth House, University of Oxford in its series QEH Working Papers with number qehwps50.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:qeh:qehwps:qehwps50

Contact details of provider:
Postal: Queen Elizabeth House 3 Mansfield Road, Oxford, OX1 3TB United Kingdom
Phone: +44 (1865) 281800
Fax: +44 (1865) 281801
Email:
Web page: http://www.qeh.ox.ac.uk/
More information through EDIRC

Related research

Keywords:

This paper has been announced in the following NEP Reports:

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. Jeffrey J. Frankel and Andrew K. Rose., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers C96-062, University of California at Berkeley.
  2. Stephen P. Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 16-88, Wharton School Rodney L. White Center for Financial Research.
  3. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
  4. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  5. Claessens, Stijn & Dooley, Michael P & Warner, Andrew, 1995. "Portfolio Capital Flows: Hot or Cold?," World Bank Economic Review, World Bank Group, vol. 9(1), pages 153-74, January.
  6. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  7. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," William Davidson Institute Working Papers Series 79, William Davidson Institute at the University of Michigan.
  8. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  9. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
  10. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  11. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  12. Calomiris, Charles W., 1999. "Building an incentive-compatible safety net," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1499-1519, October.
  13. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
  14. Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Wiley Blackwell, vol. 37(3), pages 353-60, July.
  15. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04.
  16. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  17. Robert E. Lipsey, 2000. "The Role of Foreign Direct Investment in International Capital Flows," NBER Working Papers 7094, National Bureau of Economic Research, Inc.
  18. Bekaert, G. & Harvey, C. R. & Lumsdaine, R. L., 2002. "The dynamics of emerging market equity flows," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 295-350, June.
  19. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 301-334.
  20. Andrew Berg & Catherine Pattillo, 1999. "Are Currency Crises Predictable? A Test," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 1.
  21. Durham, J Benson, 1999. " Economic Growth and Political Regimes," Journal of Economic Growth, Springer, vol. 4(1), pages 81-111, March.
  22. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January.
  23. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc.
  24. Geert Bekaert & Campbell R. Harvey, 1998. "Capital Flows and the Behavior of Emerging Market Equity Returns," NBER Working Papers 6669, National Bureau of Economic Research, Inc.
  25. Obstfeld, Maurice, 1992. "Risk-Taking, Global Diversification, and Growth," CEPR Discussion Papers 688, C.E.P.R. Discussion Papers.
  26. M. Pastor, Jr & S. Maxfield, 1999. "Central Bank Independence and Private Investment in the Developing World," Economics and Politics, Wiley Blackwell, vol. 11(3), pages 299-309, November.
  27. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  28. Calvo, Guillermo A. & Mendoza, Enrique G., 2000. "Rational contagion and the globalization of securities markets," Journal of International Economics, Elsevier, vol. 51(1), pages 79-113, June.
  29. Mirman, Leonard J, 1971. "Uncertainty and Optimal Consumption Decisions," Econometrica, Econometric Society, vol. 39(1), pages 179-85, January.
  30. Nelson, Richard R & Wright, Gavin, 1992. "The Rise and Fall of American Technological Leadership: The Postwar Era in Historical Perspective," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1931-64, December.
  31. Fischer, S. & Cooper, R.N. & Dornbusch, R. & Garber, P.M. & Massad, C. & Polak, J.J. & Rodrik, D. & Tarapore, S.S., 1998. "Should the IMF Pursue Capital-Account Convertibility?," Princeton Essays in International Economics 207, International Economics Section, Departement of Economics Princeton University,.
  32. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  33. Aaron Tornell, 1999. "Common Fundamentals in the Tequila and Asian Crises," NBER Working Papers 7139, National Bureau of Economic Research, Inc.
  34. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc.
  35. Takatoshi Ito, 2000. "Capital Flows in Asia," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 255-296 National Bureau of Economic Research, Inc.
  36. Joshua Aizenman & Nancy P. Marion, 1996. "Volatility and the Investment Response," NBER Working Papers 5841, National Bureau of Economic Research, Inc.
  37. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1994. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
  38. Bekaert, Geert, 1995. "Market Integration and Investment Barriers in Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 75-107, January.
  39. Mishkin, Frederic S., 1999. "Lessons from the Tequila Crisis," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1521-1533, October.
  40. J. Caprio & P. Honohan, 2000. "Restoring Banking Stability: Beyond Supervised Capital Requirements," South African Journal of Economics, Economic Society of South Africa, vol. 68(1), pages 5-22, 03.
  41. Froot, Kenneth A. & O'Connell, Paul G. J. & Seasholes, Mark S., 2001. "The portfolio flows of international investors," Journal of Financial Economics, Elsevier, vol. 59(2), pages 151-193, February.
  42. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
  43. Malcolm D. Knight, 1998. "Developing Countries and the Globalization of Financial Markets," IMF Working Papers 98/105, International Monetary Fund.
  44. Knight, Malcolm, 1998. "Developing Countries and the Globalization of Financial Markets," World Development, Elsevier, vol. 26(7), pages 1185-1200, July.
  45. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  46. Stockman, Alan C., 1999. "Choosing an exchange-rate system," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1483-1498, October.
  47. Durham, J. Benson, 2001. "Sensitivity analyses of anomalies in developed stock markets," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1503-1541, August.
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. Patricia Hofmann, 2008. "Globalization and Technical Progress: Channels of Reciprocal Interaction A Literature Review," DEGIT Conference Papers c013_011, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 04 Feb 2003.
  3. Alexander Cobham, . "Capital Account Liberalisation and Poverty," QEH Working Papers qehwps70, Queen Elizabeth House, University of Oxford.
  4. Ladekarl, Jeppe & Zervos, Sara, 2004. "Housekeeping and plumbing: the investability of emerging markets," Emerging Markets Review, Elsevier, vol. 5(3), pages 267-294, September.

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:qeh:qehwps:qehwps50. 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: (Rachel Crawford).

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.