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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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    Cited by:

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    2. Apostolides, Alexander, 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”," MPRA Paper 9968, 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. Peter Bernholz, 2008. "Government Bankruptcy of Balkan Nations and their Consequences for Money and Inflation before 1914: A Comparative Analysis," Working Papers 74, Bank of Greece.
    5. Zarko Lazarevic, 2008. "Banking Performance in South-Eastern Europe During the Interwar Period," Working Papers 79, Bank of Greece.
    6. Pappas, Anastasios P., 2010. "Capital Mobility and Macroeconomic Volatility: Evidence from Greece," The Journal of Economic Asymmetries, Elsevier, vol. 7(1), pages 101-121.
    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.
    8. Pappas, Anastasios, 2010. "Capital mobility and growth: Evidence from Greece," MPRA Paper 29105, University Library of Munich, Germany.
    9. Stephan Barisitz, 2008. "Banking Transformation (1989 - 2006) in Central and Eastern Europe - With Special Reference to Balkans," Working Papers 78, Bank of Greece.

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    More about this item

    Keywords

    Capital flows; Growth; Financial crises; Panel data;
    All these keywords.

    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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