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What Moves Capital to Transition Economies?

Author

Listed:
  • Nada Mora
  • Ratna Sahay
  • Jeronimo Zettelmeyer
  • Pietro Garibaldi

Abstract

Between 1991 and 1999, capital flows to 25 transition economies in Europe and the former Soviet Union differed widely in terms of overall levels and the share and composition of private flows. With some exceptions (notably Russia), the main form of private inflows was foreign direct investment. Portfolio investment was volatile and concentrated in a handful of countries. Regressions show that direct investment can be well explained in terms of economic fundamentals, whereas the presence of a financial market infrastructure and a property-rights indicator are the only explanatory variables that seem to have had a robust effect on portfolio investment.

Suggested Citation

  • Nada Mora & Ratna Sahay & Jeronimo Zettelmeyer & Pietro Garibaldi, 2002. "What Moves Capital to Transition Economies?," IMF Working Papers 02/64, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/64
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    Keywords

    Capital flows; Foreign direct investment; Transition economies; portfolio investment; direct investment; investment flows; investment restrictions; Financial Aspects of Economic Integration; Socialist Systems and Transitional Economies: General; Comparative Economic Systems: General;

    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
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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