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The Effects of Flight on Growth and Investmentin Emerging Markets

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  • Suh, Jae-Hyun

Abstract

We investigated the impact of massive foreign-asset purchases by domestic agents (flight) on domestic countriesʼ real GDP growth and investment by employing diverse generalized method of moments estimators. Flight is a matter for concern because it may indicate that domestic investors are fleeing domestic markets. However, our results show that flight is only harmful if there are not enough capital inflows from foreign investors. These results suggest that domestic investors do not significantly substitute foreign assets for domestic assets and, even if they do, domestic firms may not be severely damaged if they can borrow from nonresidents.

Suggested Citation

  • Suh, Jae-Hyun, 2022. "The Effects of Flight on Growth and Investmentin Emerging Markets," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 63(1), pages 51-71, June.
    • Handle: RePEc:hit:hitjec:v:63:y:2022:i:1:p:51-71
    DOI: 10.15057/hje.2022003
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    More about this item

    Keywords

    gross capital flows; flight; stop; GMM estimation; emerging market economies;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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