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Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990–2010


  • Joshua Aizenman


  • Yothin Jinjarak


  • Donghyun Park



We investigate the relationship between economic growth and lagged international capital flows, disaggregated into FDI, portfolio investment, equity investment, and short-term debt. We follow about 100 countries during 1990–2010 when emerging markets became more integrated into the international financial system. We look at the relationship both before and after the global crisis. Our study reveals a complex and mixed picture. The relationship between growth and lagged capital flows depends on the type of flows, economic structure, and global growth patterns. We find a large and robust relationship between FDI – both inflows and outflows – and growth. The relationship between growth and equity flows is smaller and less stable. Finally, the relationship between growth and short-term debt is nil before the crisis, and negative during the crisis. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2013. "Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990–2010," Open Economies Review, Springer, vol. 24(3), pages 371-396, July.
  • Handle: RePEc:kap:openec:v:24:y:2013:i:3:p:371-396
    DOI: 10.1007/s11079-012-9247-3

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    References listed on IDEAS

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    More about this item


    Capital flows; Economic growth; FDI; Portfolio investment; Equity investment; Short-term debt; Financial integration; Financial crisis; F43; F21; F32;

    JEL classification:

    • 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
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies


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