IDEAS home Printed from https://ideas.repec.org/a/lap/journl/615.html

The effect of capital-flows composition on output volatility

Author

Listed:
  • Pablo Federico, Carlos Vegh, Guillermo Vuletin

    (BlackRock, World Bank)

Abstract

By distinguishing between foreign direct investment (FDI) and portfolio and other investments (OTR), we study the effects of the composition of capital inflows on output volatility. We develop a simple empirical model which, under certain conditions satisfied in the data, yields three key testable implications. First, output volatility should depend positively on FDI and OTR volatility. Second, output volatility should be an increasing function of the correlation between FDI and OTR. Third, for low values of the FDI share, output volatility should be a decreasing function of the share of FDI in total capital inflows. We find strong support in the data for all three implications, even after controlling for other factors that may influence output volatility and dealing with potential endogeneity problems.

Suggested Citation

  • Pablo Federico, Carlos Vegh, Guillermo Vuletin, 2018. "The effect of capital-flows composition on output volatility," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 64, pages 95-132, January-D.
    • Handle: RePEc:lap:journl:615
    as

    Download full text from publisher

    File URL: https://revistas.unlp.edu.ar/Economica/article/view/6109/5550
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mark K. Armah, 2024. "The effect of central bank credibility on economic growth and output volatility in inflation targeting regime," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 26(2), pages 619-640, August.
    2. Lan Khanh Chu & Huong Hoang Diep Truong & Hoang Phuong Dung, 2023. "Unveiling the influence of economic complexity and economic shocks on output growth volatility: evidence from a global sample," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 637-676, December.
    3. Hansen, Erwin & Wagner, Rodrigo, 2022. "The reinvestment by multinationals as a capital flow: Crises, imbalances, and the cash-based current account," Journal of International Money and Finance, Elsevier, vol. 124(C).
    4. Armelius, Hanna & Bertsch, Christoph & Hull, Isaiah & Zhang, Xin, 2020. "Spread the Word: International spillovers from central bank communication," Journal of International Money and Finance, Elsevier, vol. 103(C).
    5. Alimov, Behzod, 2022. "The dynamic effects of debt and equity inflows: Evidence from emerging and developing countries," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

    Statistics

    Access and download statistics

    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:lap:journl:615. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Milagros Cejas (email available below). General contact details of provider: https://edirc.repec.org/data/funlpar.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.