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Capital flows and political conflicts: Evidence from Thailand


  • Pongsak Luangaram

    () (Faculty of Economics, Chulalongkorn University, Bangkok, Thailand)

  • Yuthana Sethapramote

    () (School of Development Economics, National Institute of Development Administration, Bangkok, Thailand)


How do domestic political conflicts affect capital flows into Thailand? This article advances the current understanding in two ways. First, it adopts a new method for measuring political uncertainty using Thai-language newspapers over the past 20 years. Given that the nature of political conflicts is multi-faceted, these measures cover the various key components of Thai political tensions—both within and outside of parliament. Second, how different types of tensions affect capital flows are examined using a quantile regression framework—allowing an examination of effects upon the overall distribution of capital flows. The empirical results indicate that Thai political conflicts significantly and adversely affect both foreign direct investment and foreign portfolio investment at the left tails of their distribution. The results also highlight how different types of political conflicts affect capital flows in different ways. For example, uncertainty about a military coup and government measures regarding martial law or emergency decrees have a strong negative effect upon foreign direct investment flows; whereas heightened political protest and news about constitutional reform play a significant role in explaining the risk reversal of foreign portfolio investment flows.

Suggested Citation

  • Pongsak Luangaram & Yuthana Sethapramote, 2020. "Capital flows and political conflicts: Evidence from Thailand," Economics of Peace and Security Journal, EPS Publishing, vol. 15(2), pages 83-100, October.
  • Handle: RePEc:epc:journl:v:15:y:2020:i:2:p:83-100
    DOI: 10.15355/epsj.15.2.83

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    More about this item


    Capital flows; foreign direct investment; foreign portfolio investment; political uncertainty; Thailand;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F3 - International Economics - - International Finance
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War


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