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The interaction effects of financial openness and institutions on international capital flows

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  • Okada, Keisuke
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    This paper examines how financial openness and institutional quality affect international capital inflows, using data of 112 countries from 1985 to 2009. Our main findings are twofold. First, while financial openness and institutional quality do not individually have a significant impact on international capital inflows, their interaction effects are significant. More specifically, the partial effect of financial openness on international capital inflows is increasing in the level of institutional quality. Second, among institutional factors, bureaucratic quality and law and order play an important role in foreign direct investment.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0164070412001103
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    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 35 (2013)
    Issue (Month): C ()
    Pages: 131-143

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    Handle: RePEc:eee:jmacro:v:35:y:2013:i:c:p:131-143
    DOI: 10.1016/j.jmacro.2012.11.003
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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