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Short -Term Capital Flows and Growth in Developed and Emerging Markets

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  • Pavlos Petroulas

    () (Bank of Greece)

Abstract

A lot of attention has been directed towards recent financial crises around the world. Empirical studies have found that short-term flows increase financial fragility and increase also the probability of financial crises. This study takes a macro-oriented approach and shows that while large and volatile short-term flows have no effect on growth for rich countries, they are growth inhibiting for emerging markets. These results are robust to a large variety of estimation methods and pass stringent extreme bound analysis criteria. Moreover, their magnitude turns out to be of economic importance. The analysis indicates that opening up emerging markets' capital accounts, which implies increased short-term capital flows, is not a clear-cut way to prosperity.

Suggested Citation

  • Pavlos Petroulas, 2007. "Short -Term Capital Flows and Growth in Developed and Emerging Markets," Working Papers 60, Bank of Greece.
  • Handle: RePEc:bog:wpaper:60
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Michele Sabatino, 2016. "The de-industrialization process in South Italy and the new industrial policies in Europe," ERSA conference papers ersa16p885, European Regional Science Association.
    2. Pappas, Anastasios, 2010. "Capital mobility and growth: Evidence from Greece," MPRA Paper 29105, University Library of Munich, Germany.
    3. Cristi Marcel Spulbăr, 2010. "The financial systems – an approach from the perspective of the financial crisis," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 3(38), pages 1-8, May.
    4. Anastasios, Pappas, 2010. "Capital mobility and macroeconomic volatility: evidence from Greece," MPRA Paper 29106, University Library of Munich, Germany.
    5. Alexander Apostolides, 2008. "How Similar to South-Eastern Europe were the Islands of Cyprus and Malta in terms of Agricultural Output and Credit? Evidence during the Interwar Period," Working Papers 80, Bank of Greece.
    6. Zarko Lazarevic, 2008. "Banking Performance in South-Eastern Europe During the Interwar Period," Working Papers 79, Bank of Greece.
    7. Roumen Avramov & Dragana Gnjatovic, 2008. "Stabilization Policies in Bulgaria and Yugoslavia During Communism's Terminal Years : 1980s Economic Visions in Retrospect," Working Papers 81, Bank of Greece.

    More about this item

    Keywords

    Capital flows; Growth; Financial crises; Panel data;

    JEL classification:

    • 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
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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