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Medium-Term Determinants of International Investment Positions: The Role of Structural Policies

Author

Listed:
  • Davide Furceri

    (OECD)

  • Stéphanie Guichard

    (OECD)

  • Elena Rusticelli

    (OECD)

Abstract

This paper provides an empirical investigation of the medium-term determinants of international investment positions for a large sample of advanced and emerging economies. In addition to the usually considered drivers of foreign assets and liabilities, the analysis focuses on the role of structural policy indicators. Using cross-section and panel regression techniques the results suggest that structural policy settings are important long-term drivers of capital flows, having a relatively large impact on gross and net foreign capital positions and on their composition. In particular, the results suggest that certain kinds of structural policy reform could help to narrow global imbalances, and to modify the composition of international capital flows towards more stable and productive sources. Déterminants à moyen terme des positions étrangères extérieures : le rôle des politiques structurelles Cet article présente une étude empirique des déterminants à moyen terme de positions de l'investissement international pour un large échantillon des économies avancées et émergentes. En plus des déterminants usuels des engagements et actifs internationaux, l'analyse met l'accent sur le rôle des indicateurs structurels. Les résultats des régressions en coupe transversale et en panel suggèrent que les politiques structurelles en place sont d'importants moteurs à long terme des flux de capitaux, ayant un impact relativement important sur les positions extérieures brutes et nettes et sur leur composition. En particulier, les résultats suggèrent que certains types de réforme des politiques structurelles pourraient aider à réduire les déséquilibres mondiaux et á modifier la composition des flux de capitaux vers des sources plus stables et plus productives.

Suggested Citation

  • Davide Furceri & Stéphanie Guichard & Elena Rusticelli, 2011. "Medium-Term Determinants of International Investment Positions: The Role of Structural Policies," OECD Economics Department Working Papers 863, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:863-en
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    File URL: http://dx.doi.org/10.1787/5kgc9kzsm19x-en
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    References listed on IDEAS

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    1. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-151, January.
    2. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2007. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 19-72 National Bureau of Economic Research, Inc.
    3. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    4. Gian‐Maria Milesi‐Ferretti & Cédric Tille, 2011. "The great retrenchment: international capital flows during the global financial crisis," Economic Policy, CEPR;CES;MSH, vol. 26(66), pages 285-342, April.
    5. Calista Cheung & Davide Furceri & Elena Rusticelli, 2013. "Structural and Cyclical Factors behind Current Account Balances," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 923-944, November.
    6. Barry P. Bosworth & Susan M. Collins, 1999. "Capital Flows to Developing Economies: Implications for Saving and Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 143-180.
    7. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
    8. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
    9. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, January.
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    Cited by:

    1. Dong He & Lillian Cheung & Wenlang Zhang & Tommy Wu, 2012. "How would Capital Account Liberalization Affect China's Capital Flows and the Renminbi Real Exchange Rates?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(6), pages 29-54, November.
    2. Stefan Huemer & Beatrice Scheubel & Florian Walch, 2013. "Measuring Institutional Competitiveness in Europe," CESifo Economic Studies, CESifo, vol. 59(3), pages 576-608, September.
    3. Saif Al-Abri, Almukhtar, 2014. "How does terms-of-trade behavior shape international financial integration in primary-commodity exporting economies?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 335-353.
    4. Furceri, Davide & Guichard, Stéphanie & Rusticelli, Elena, 2012. "The effect of episodes of large capital inflows on domestic credit," The North American Journal of Economics and Finance, Elsevier, vol. 23(3), pages 325-344.
    5. Davide Furceri & Stéphanie Guichard & Elena Rusticelli, 2012. "Episodes of Large Capital Inflows, Banking and Currency Crises, and Sudden Stops," International Finance, Wiley Blackwell, vol. 15(1), pages 1-35, April.
    6. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Policy Contributions 747, Bruegel.
    7. Davide Furceri & Stéphanie Guichard & Elena Rusticelli, 2011. "Episodes of Large Capital Inflows and the Likelihood of Banking and Currency Crises and Sudden Stops," OECD Economics Department Working Papers 865, OECD Publishing.
    8. Gheorghe Hurduzeu & Maria-Isadora Lazar, 2015. "An Analysis of Economic Growth, Competitiveness and Macroeconomic Imbalances in the European Union," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(57), pages 37-50, September.

    More about this item

    Keywords

    capital flows; déséquilibres mondiaux; flux des capitaux; global imbalances; politique structurelle; structural policy;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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