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Exogenous characteristics of short-term capital flows: can they be under control? evidence from Turkey

  • Levent, Korap
  • Özgür, Aslan

In our paper, we give an essay trying to explore whether short-term capital flows can affect and/or be affected by some main domestic macroeconomic indicators called ‘pull’ factors such as real effective exchange rate, trade balance, real income growth process, domestic inflation and real interest structure for the case of Turkish economy. Our estimation results employing some contemporaneous estimation techniques of unrestricted dynamic vector autoregression (VAR) models reveal that short-term capital flows have in fact an important role on the ‘pull’ factors in the sense that inflows appreciate the real effective exchange rate and in turn deteriorate the trade balance, encourage the real income growth, and decrease the real interest rates. But we could not find any significant effects of the ‘pull’ factors on the capital flows.

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File URL: https://mpra.ub.uni-muenchen.de/19504/1/MPRA_paper_19504.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19504.

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Date of creation: 2007
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Publication status: Published in İstanbul Üniversitesi Sosyal Bilimler Meslek Yüksekokulu Sosyal Bilimler Dergisi 1.2007(2007): pp. 1-16
Handle: RePEc:pra:mprapa:19504
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  1. Aysu Insel & Nesrin Sungur, 2003. "Sermaye Akýmlarýnýn Temel Makroekonomik Göstergeler Üzerindeki Etkileri: Türkiye Örneði-1989:III-1999:IV," Working Papers 2003/8, Turkish Economic Association.
  2. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America; The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
  3. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January.
  4. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  5. Cem Saatcioglu & Levent Korap, 2006. "Determinants of Turkish Inflation," Working Papers 2006/7, Turkish Economic Association.
  6. Hakan Berument & N. Nergiz Dincer, 2004. "Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? : The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(4), pages 20-32, July.
  7. Reinhart, Carmen & Montiel, Peter, 2001. "The Dynamics of Capital Movements to Emerging Economies During the 1990s," MPRA Paper 7577, University Library of Munich, Germany.
  8. Bahmani-Oskooee, Mohsen, 1991. "Is there a long-run relation between the trade balance and the real effective exchange rate of LDCs?," Economics Letters, Elsevier, vol. 36(4), pages 403-407, August.
  9. Mohsen Bahmani-Oskooee, 2001. "Nominal and real effective exchange rates of middle eastern countries and their trade performance," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 103-111.
  10. Zhaohui Chen & Mohsin S. Khan, 1997. "Patterns of Capital Flows to Emerging Markets; A Theoretical Perspective," IMF Working Papers 97/13, International Monetary Fund.
  11. Yung-Hsiang Ying & Yoonbai Kim, 2001. "An Empirical Analysis on Capital Flows: The Case of Korea and Mexico," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 954-968, April.
  12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  13. Dasgupta, Dipak & Ratha, Dilip, 2000. "What factors appear to drive private capital flows to developing countries? and how does official lending respond?," Policy Research Working Paper Series 2392, The World Bank.
  14. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  15. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "Af1uencia de capital y apreciacion del tipo de cambio real en America Latina: E1 papel de los factores externos
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    ," MPRA Paper 13681, University Library of Munich, Germany.
  16. Taylor, Mark P & Sarno, Lucio, 1997. "Capital Flows to Developing Countries: Long- and Short-Term Determinants," World Bank Economic Review, World Bank Group, vol. 11(3), pages 451-70, September.
  17. Chuhan, Punam & Claessens,Constantijn A. & Mamingi, Nlandu, 1993. "Equity and bond flows to Asia and Latin America : the role of global and country factors," Policy Research Working Paper Series 1160, The World Bank.
  18. Kim, Yoonbai, 2000. "Causes of capital flows in developing countries," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 235-253, April.
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