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

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A lot of attention has been directed towards recent financial crises around the world. It seems that financial markets are prone to herding, panics, contagion and boom-bust cycles. Empirical studies have found that short-term flows increase financial fragility and also increase the probability of financial crises. This study takes a macro-oriented approach and shows that large and volatile short-term flows may be growth inhibiting for emerging markets. This is not the case though for rich countries, where short-term capital flows have no effect on growth. The results in this study indicate that opening up emerging markets capital accounts, which imply increased short-term capital flows, is not a clear-cut way to prosperity.

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  • Petroulas, Pavlos, 2004. "Short-Term Capital Flows and Growth in Developed and Emerging Markets Pavlos," Research Papers in Economics 2004:4, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2004_0004
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    Keywords

    Capital flows; Growth; Financial crises; Panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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