IDEAS home Printed from https://ideas.repec.org/p/unu/wpaper/rp2004-46.html
   My bibliography  Save this paper

The Transition from Official Aid to Private Capital Flows: Implications for a Developing Country

Author

Listed:
  • Renu Kohli

Abstract

India's capital account displays a sharp swing in external financing from official assistance to private capital transfers in the 1990s. This paper examines the implications of this transition for the country. An analysis of the private resource transfer reveals that unlike official flows, private capital flows are associated with real exchange rate appreciation, expansion in domestic money supply and stock market growth, liquidity and volatility. The paper concludes with a discussion on the implications of the transition for economic policy.

Suggested Citation

  • Renu Kohli, 2004. "The Transition from Official Aid to Private Capital Flows: Implications for a Developing Country," WIDER Working Paper Series RP2004-46, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2004-46
    as

    Download full text from publisher

    File URL: https://www.wider.unu.edu/sites/default/files/rp2004-046.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    2. De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, vol. 63(1), pages 59-83, October.
    3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    4. Ms. Renu Kohli, 2001. "Capital Flows and Their Macroeconomic Effects in India," IMF Working Papers 2001/192, International Monetary Fund.
    5. Ms. Carmen Reinhart & Mr. Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 1995/015, International Monetary Fund.
    6. Renu Kohli, 2004. "Aspects of Exchange Rate Behaviour and Management in India 1993- 98," International Finance 0405010, University Library of Munich, Germany.
    7. Claessens, Stijn & Dooley, Michael P & Warner, Andrew, 1995. "Portfolio Capital Flows: Hot or Cold?," The World Bank Economic Review, World Bank Group, vol. 9(1), pages 153-174, January.
    8. Gruben, William C. & McLeod, Darryl, 1998. "Capital Flows, Savings, and Growth in the 1990s," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 1), pages 287-301.
    9. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    10. Gunther, Jeffery W. & Moore, Robert R. & Short, Genie D., 1996. "Mexican banks and the 1994 peso crisis: The importance of initial conditions," The North American Journal of Economics and Finance, Elsevier, vol. 7(2), pages 125-133.
    11. Kohli, Renu, 2003. "Real exchange rate stabilisation and managed floating: exchange rate policy in India, 1993-2001," Journal of Asian Economics, Elsevier, vol. 14(3), pages 369-387, June.
    12. Corbo, Vittorio & Hernandez, Leonardo, 1994. "Macroeconomic adjustment to capital inflows : Latin American style versus East Asian style," Policy Research Working Paper Series 1377, The World Bank.
    13. Glick,Reuven (ed.), 1998. "Managing Capital Flows and Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521623230.
    14. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February.
    15. Mark M. Spiegel, 1995. "Sterilization of capital inflows through the banking sector: evidence from Asia," Economic Review, Federal Reserve Bank of San Francisco, pages 17-34.
    16. Ms. Renu Kohli & Kenneth Kletzer, 2001. "Financial Repression and Exchange Rate Management in Developing Countries: Theory and Empirical Evidence for India," IMF Working Papers 2001/103, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ms. Renu Kohli, 2001. "Capital Flows and Their Macroeconomic Effects in India," IMF Working Papers 2001/192, International Monetary Fund.
    2. Steven B. Kamin & Paul R. Wood, 1996. "Capital inflows, financial intermediation, and aggregate demand: empirical evidence from Mexico and other Pacific Basin countries," Proceedings, Federal Reserve Bank of San Francisco, pages 356-405.
    3. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
    4. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    5. Renu Kohli, 2004. "Capital Flows and Domestic Financial Sector in India," International Finance 0405012, University Library of Munich, Germany.
    6. Jeffrey A. Frankel, 2010. "Monetary Policy in Emerging Markets: A Survey," NBER Working Papers 16125, National Bureau of Economic Research, Inc.
    7. Mr. Peter S. Heller, 1997. "Fiscal Policy Management in an Open Capital Regime," IMF Working Papers 1997/020, International Monetary Fund.
    8. Reinhart, Carmen M. & Smith, R. Todd, 2002. "Temporary controls on capital inflows," Journal of International Economics, Elsevier, vol. 57(2), pages 327-351, August.
    9. Clara Garcia, 2004. "Capital Inflows, Policy Responses, and Their Ill Consequences: Thailand, Malaysia, and Indonesia in the Decade Before the Crises," Working Papers wp81, Political Economy Research Institute, University of Massachusetts at Amherst.
    10. Ila Patnaik, 2003. "The Consequences of currency intervention in India," Indian Council for Research on International Economic Relations, New Delhi Working Papers 114, Indian Council for Research on International Economic Relations, New Delhi, India.
    11. Mark A. Carlson & Leonardo Hernandez, 2002. "Determinants and repercussions of the composition of capital inflows," International Finance Discussion Papers 717, Board of Governors of the Federal Reserve System (U.S.).
    12. Kletzer, Kenneth & Spiegel, Mark M., 2004. "Sterilization costs and exchange rate targeting," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 897-915, October.
    13. Renu Kohli, 2004. "Capital Account Liberalisation: Empirical Evidence and Policy Capital Account Liberalisation: Empirical Evidence and Policy Issues - I," International Finance 0405008, University Library of Munich, Germany.
    14. Steven B. Kamin & Paul R. Wood, 1997. "Capital inflows, financial intermediation, and aggregate demand," International Finance Discussion Papers 583, Board of Governors of the Federal Reserve System (U.S.).
    15. Gian Maria Milesi Ferretti & Assaf Razin, 1999. "Current Account Deficits and Capital Flows in East Asia and Latin America: Are the Early Nineties Different From the Early Eighties," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, pages 57-108, National Bureau of Economic Research, Inc.
    16. Ranjanendra Narayan Nag & Sayan Baksi & Sayantan Bandhu Majumder, 2015. "Capital Flows, Asset Prices and Output in Emerging Market Economies," Foreign Trade Review, , vol. 50(1), pages 1-20, February.
    17. Sebastian Edwards, 2011. "Exchange-Rate Policies in Emerging Countries: Eleven Empirical Regularities From Latin America and East Asia," Open Economies Review, Springer, vol. 22(4), pages 533-563, September.
    18. Assaf Razin & Mr. Gian M Milesi-Ferretti, 1996. "Current Account Sustainability: Selected East Asian and Latin American Experiences," IMF Working Papers 1996/110, International Monetary Fund.
    19. Sebastian Edwards & Roberto Rigobon, 2005. "Capital Controls, Exchange Rate Volatility and External Vulnerability," NBER Working Papers 11434, National Bureau of Economic Research, Inc.
    20. Betts, Caroline & Devereux, Michael B, 2000. "International Monetary Policy Coordination and Competitive Depreciation: A Reevaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 722-745, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:rp2004-46. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Siméon Rapin (email available below). General contact details of provider: https://edirc.repec.org/data/widerfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.