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Capital Inflows and Capital Outflows: Measurement, Determinants, Consequences

Author Info

  • Andrew Powell
  • Dilip Ratha
  • Sanket Mohapatra

Abstract

This paper develops new estimates of capital outflows and is the first, to our knowledge, to analyze the determinants, consequences and inter-relationship between inflows and outflows. Given the dynamics and individual country effects, we use a panel-VAR and find that inflows and outflows are inter-related, that lower inflows/higher outflows lead to lower growth, and among other effects to a higher fiscal deficit, which feeds back to lower inflows/higher outflows. These results provide evidence of vicious and virtuous cycles. We find no strong evidence that official flows crowd-in private ones. We conclude it is particularly important for developing countries to maintain prudent policies, and especially adequate fiscal discipline, to avoid vicious and reinforce virtuous cycles.

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File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-072002.pdf
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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number veinticinco.

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Length: 52 pages
Date of creation: Aug 2002
Date of revision:
Handle: RePEc:udt:wpbsdt:veinticinco
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Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994
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Cited by:

  1. Andrew Powell & Pilar Tavella, 2012. "Capital Inflow Surges in Emerging Economies: How Worried Should LAC Be?," IDB Publications (Working Papers) 76956, Inter-American Development Bank.
  2. Broner, Fernando & Didier, Tatiana & Erce, Aitor & Schmukler, Sergio L., 2011. "Gross capital flows : dynamics and crises," Policy Research Working Paper Series 5768, The World Bank.
  3. Ratha, Dilip & Mohapatra, Sanket & Plaza, Sonia, 2008. "Beyond aid : new sources and innovative mechanisms for financing development in Sub-Saharan Africa," Policy Research Working Paper Series 4609, The World Bank.
  4. Suhas Ketkar & Dilip Ratha, 2009. "Innovative Financing for Development," World Bank Publications, The World Bank, number 6549, October.
  5. Love, Inessa & Zicchino, Lea, 2002. "Financial development and dynamic investment behavior : evidence from panel vector autoregression," Policy Research Working Paper Series 2913, The World Bank.

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