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Capital Flows (capital + flow)
Kinds of Capital Flows Selected AbstractsINTERNATIONAL CAPITAL MOBILITY AND TRADE POLITICS: CAPITAL FLOWS, POLITICAL COALITIONS, AND LOBBYINGECONOMICS & POLITICS, Issue 3 2004Michael J. Hiscox Conventional wisdom holds that increasing international capital mobility reduces incentives for firms to lobby for trade protection. This paper argues that the effects of increased international capital mobility on the lobbying incentives of firms depend critically upon levels of inter-industry mobility. General-equilibrium analysis reveals that if capital is highly industry-specific, greater international mobility among some types of specific capital may increase lobbying incentives for owners of other specific factors and thereby intensify industry-based rent-seeking in trade politics. Evidence on levels of inward and outward investment in US manufacturing industries between 1982 and 1996, and on industry lobbying activities, indicate that these effects may be quite strong. [source] CURRENCY UNIONS, TRADE FLOWS AND CAPITAL FLOWSPACIFIC ECONOMIC REVIEW, Issue 2 2007James Yetman The existing empirical evidence is based on reduced form models of trade, and therefore indicates correlation between but neither causality nor mechanism. This paper argues that the causal relationship runs from currency unions to trade, and then considers two possible mechanisms behind this: currency union membership: reduces trade resistance or reduces investment resistance. We argue that both mechanisms are required to explain the observed economic impact of currency union membership. [source] Debt v. Foreign Direct Investment: The Impact of Sovereign Risk on the Structure of International Capital FlowsECONOMICA, Issue 273 2002Monika Schnitzer The paper compares the two standard forms of international investment in developing countries, debt and foreign direct investment (FDI), from a finance perspective. The sovereign risks associated with debt finance are shown to be generally less severe than the ones that come with FDI. FDI is chosen only if the foreign investor is more efficient in running the project, if the project is risky, and if the foreign investor has a good outside option which deters creeping expropriation. The sovereign risk problem of FDI can be alleviated if the host country and the foreign investor form a joint venture. [source] The Oecd Model Tax Treaty: Tax Competition And Two-Way Capital Flows*INTERNATIONAL ECONOMIC REVIEW, Issue 2 2003Ronald B. Davies Model tax treaties do not require tax rate coordination, but do require that either credits or exemptions be applied to repatriated earnings. This contradicts recent models with a single capital exporter where deductions are most efficient. I incorporate the fact that capital flows are typically bilateral. With symmetric countries, credits by both is the unique and efficient treaty equilibrium. This equilibrium weakly dominates the nontreaty equilibrium. With asymmetric countries, the treaty need not offer improvements without tax harmonization. With harmonization, it is always possible to reach efficient capital allocations while increasing both countries' welfares only if neither uses deductions. [source] Transnational Governance in Global Finance: The Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets1INTERNATIONAL STUDIES PERSPECTIVES, Issue 3 2010Raymond Ritter This paper analyzes and assesses the "Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets," which have emerged as an important instrument for crisis prevention and crisis resolution in the international financial system. The paper argues that, notwithstanding their low profile, the Principles which were jointly agreed between key sovereign debtors and their private creditors in 2004 have proved to be a useful instrument in spite of their voluntary and non-binding nature. Indeed, an increasing number of sovereign debtors and private creditors have adopted the Principles' recommendations on transparency and the timely flow of information, close dialogue, "good faith" actions, and fair treatment. The paper, taking a rational choice perspective, appraises the Principles as the product of a transnational public-private partnership as well as a soft mode of governance. Moreover, it shows how the Principles have moved somewhat along the continuum of soft law and hard law toward the latter. Finally, the paper makes the case that the Principles and their design features can provide some lessons for the current international policy debate on codes of conduct in global financial regulation. [source] Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis,THE ECONOMIC JOURNAL, Issue 544 2010David Laibson Bernanke (2005) hypothesised that a ,global savings glut' was causing large trade imbalances. However, we show that the global savings rates did not show a robust upward trend during the relevant period. Moreover, if there had been a global savings glut there should have been a large investment boom in the countries that imported capital. Instead, those countries experienced consumption booms. National asset bubbles explain the international imbalances. The bubbles raised consumption, resulting in large trade deficits. In a sample of 18 OECD countries plus China, movements in home prices alone explain half of the variation in trade deficits. [source] Issues Regarding the Composition of Capital FlowsDEVELOPMENT POLICY REVIEW, Issue 1 2001John Williamson This article considers the composition of capital flows to developing countries. After developing a taxonomy of the alternative possible forms, it presents a brief summary of the main facts and stylised facts of relevance to the topic. It argues that accessing FDI, portfolio equity, or long-term loans, as opposed to short-term loans (e.g. from banks), is well worth the additional cost, because of advantages in terms of risk-sharing, access to intellectual property, impact on investment, and lesser vulnerability to capital flow reversal. It proceeds to discuss the extent to which authorities control appropriate policy levers and concludes with a brief look at the composition of capital outflows from developing countries. [source] Financial integration, capital mobility, and income convergenceECONOMIC POLICY, Issue 58 2009Abdul Abiad Summary Recent studies have found that capital moves ,uphill' from poor to rich countries, and brings little or no growth dividend when it does flow into poor economies. We show that Europe does not conform to this paradigm. In the European experience of financial integration, capital has flown from rich to poor countries, and such inflows have been associated with significant acceleration of income convergence. Analysing broader samples of countries, we find that ,downhill' capital flows tend to be observed above certain thresholds in institutional quality and financial integration. But Europe remains different even when allowing for such threshold effects, and its experience is similar to that of interstate flows within the United States. Our findings are consistent with the notion that financial diversification reduces countries' incentives to save in order to self-insure against specific shocks. ,Abdul Abiad, Daniel Leigh and Ashoka Mody [source] Divergence of US and Local Returns in the After-market for Equity Issuing ADRsEUROPEAN FINANCIAL MANAGEMENT, Issue 3 2004Padma Kadiyala F30; G12; G14 Abstract We study one-year post-listing prices and returns to equity issuing ADRs that listed in the US between January 1991 and October 2000. ADRs from countries that impose restrictions on capital flows are priced at a premium to their home market ordinaries. While the mean premium for the full sample is statistically indistinguishable from zero, after an adjustment for asynchronous trading, the magnitude of the premium to ADRs from restricted markets is 11.33% at the 300-day post listing interval, which is statistically significant. In the short run (30 days) following listing, the magnitude of the premium is larger for ADRs with larger excess demand from US investors. At the longer 300-day horizon, Nasdaq listed ADRs earn a larger premium than their NYSE/AMEX listed counterparts. Time-series regressions and two-stage cross-sectional regressions establish that the premium to foreign equity issuers is greater if the US listing attracts liquidity and if US returns have a lower correlation with the local country index. [source] MONEY FLOWS LIKE MERCURY: THE GEOGRAPHY OF GLOBAL FINANCEGEOGRAFISKA ANNALER SERIES B: HUMAN GEOGRAPHY, Issue 2 2005Gordon L Clark ABSTRACT. If the social relations and inherited configuration of production were at the core of economic geography a decade ago, these aspects of the world are increasingly taken for granted. The global scope of industry and corporate strategy has claimed increasing attention over the past decade. And while any ,new' economic geography must have something to say about the nature of human agency and the role of institutions in structuring the landscape, care must be taken not to exaggerate their significance for constructive interaction. In point of fact, the global finance industry is an essential lens through which to study contemporary capitalism from the top-down and the bottom-up. If we are to understand the economic landscape of twenty-first century capitalism, it should be understood through global financial institutions, its social formations and investment practices. This argument is developed by reference to the recent literature on the geography of finance and a metaphor , money flows like mercury , designed to explicate the spatial and temporal logic of global capital flows. Some may dispute this argument, but in doing so they lament the passing of an era rather than advancing a convincing counterclaim about how the world is and what it might become. All this means that we have to rethink the significance of geographical scale and organizational processes as opposed to an unquestioned commitment to localities. [source] Optimal Policy for Financial Market Liberalizations: Decentralization and Capital Flow ReversalsGERMAN ECONOMIC REVIEW, Issue 1 2000Theo S. Eicher Financial market liberalizations are an integral part of economic development. While initial booms in investment and output are commonly seen as signs of successful deregulation, they often reverse at a later stage as international capital flows turn negative and economic growth slows markedly. Such reversals of fortunes have commonly been attributed to incorrect policies that supposedly followed the initial, appropriate measures. It is unclear, however, if capital flow reversals are actually the result of policy reversals, or if they occur as part of the normal transition when financial liberalization is accompanied by a single suboptimal policy. The later hypothesis has not been explored in the theoretical literature We construct a general equilibrium growth model of a small open economy, in which capital flow reversals are the result of a single, suboptimal policy imposed at the beginning of the financial liberalization. We show how improper taxation of foreign borrowing initially leads to strong growth fuelled by an investment boom and foreign borrowing. Still along the transition, however, the model predicts that capital flows must reverse endogenously at a later stage, as the debt burden rises and the country-specific risk premium increases. Our data on the Latin American and East Asian countries provide strong support for our hypothesis. [source] The Oecd Model Tax Treaty: Tax Competition And Two-Way Capital Flows*INTERNATIONAL ECONOMIC REVIEW, Issue 2 2003Ronald B. Davies Model tax treaties do not require tax rate coordination, but do require that either credits or exemptions be applied to repatriated earnings. This contradicts recent models with a single capital exporter where deductions are most efficient. I incorporate the fact that capital flows are typically bilateral. With symmetric countries, credits by both is the unique and efficient treaty equilibrium. This equilibrium weakly dominates the nontreaty equilibrium. With asymmetric countries, the treaty need not offer improvements without tax harmonization. With harmonization, it is always possible to reach efficient capital allocations while increasing both countries' welfares only if neither uses deductions. [source] Investor Protection and International Investment Positions: An Empirical Analysis,INTERNATIONAL FINANCE, Issue 2 2006Teresa L. Cyrus Given the recent revival of interest in the institutional determinants of global capital flows, we investigate the relationship between investor protection and international investment positions, using data on 40 countries for the period 1970,98. We find that strong shareholder protection is an important predictor of gross foreign direct investment liabilities, while countries with strong creditor protection tend to have positive stocks of net foreign assets. We conclude that the global pattern of investor protection is a significant determinant of international investment positions. [source] Keeping Capital Flowing: The Role of the IMF,INTERNATIONAL FINANCE, Issue 3 2004Michael D. Bordo In this paper, we examine the role of the International Monetary Fund (IMF) in maintaining the access of emerging market economies to international capital markets. We find evidence that both macroeconomic aggregates and capital flows improve following the adoption of an IMF programme, although they may initially deteriorate somewhat. Consistent with theoretical predictions and earlier empirical findings, we find that IMF programmes are most successful in improving capital flows to countries with bad, but not very bad, fundamentals. In such countries, IMF programmes are also associated with improvements in the fundamentals themselves. [source] Identifying the Role of Moral Hazard in International Financial MarketsINTERNATIONAL FINANCE, Issue 1 2004Steven B. Kamin Abstract Considerable attention has been paid to the possibility that large-scale IMF-led financing packages may have distorted incentives in international financial markets, leading private investors to provide more credit to emerging market countries, and at lower interest rates, than might otherwise have been the case. Yet, prior attempts to identify such distortions have yielded mixed evidence, at best. This paper makes three contributions to our ability to assess the empirical importance of moral hazard in international financial markets. First, it is argued that, because large international ,bail-outs' did not commence until the 1995 Mexican crisis, financial indicators prior to that time could not have reflected a significant degree of this type of moral hazard. Therefore, one test for the existence of moral hazard is that the access of emerging markets to international credit is significantly easier than it was prior to 1995. Second, the paper argues that because private investors expect large-scale IMF-led packages to be extended primarily to economically or geo-politically important countries, moral hazard, if it exists, should lead these countries to have easier terms of access to credit than smaller, non-systemically important countries. Finally, in addition to looking at bond spreads, the focus of earlier empirical analyses of moral hazard, the paper also examines trends in capital flows to gauge the access of emerging market countries to external finance. Looking at the evidence in light of these considerations, the paper concludes that there is little support for the view that moral hazard is significantly distorting international capital markets at the present time. [source] Does International Financial Contagion Really Exist?INTERNATIONAL FINANCE, Issue 2 2003G. Andrew Karolyi This article surveys the various definitions and taxonomies of international financial contagion in the academic literature and popular press and relates it to the existing evidence on co-movements in international asset prices, on the growth and volatility of international capital flows and on the relationship between flows and asset prices. The central argument of the article is that the empirical evidence is not as obviously consistent with the existence of market contagion as many researchers, the press, or market regulators believe. Policy implications of this alternative viewpoint are presented. [source] Domestic Crony Capitalism and International Fickle Capital: Is There a Connection?INTERNATIONAL FINANCE, Issue 1 2001Shang-Jin WeiArticle first published online: 16 DEC 200 Domestic crony capitalism and fickle international capital flows are often suggested as two rival explanations for currency crises. This article examines a possible linkage between the two that has not been explored much in the literature: domestic crony capitalism may make a country more dependent on the more fickle type of international capital flows (e.g. international bank loans) rather than the less volatile type (e.g. foreign direct investment). It presents statistical evidence that the degree of domestic crony capitalism is indeed associated with a higher external loan-to-FDI ratio. Such a composition of capital flows has been identified as being associated with a higher incidence of a currency crisis. Therefore, even though crony capitalism does not forecast the exact timing of a crisis, it can nevertheless increase its likelihood. [source] Financial Contagion in Five Small Open Economies: Does the Exchange Rate Regime Really Matter?INTERNATIONAL FINANCE, Issue 1 2000Zsolt Darvas This paper examines the spillover effects of the global financial crises of 1997,9 on five small open economies with different types of exchange rate regimes: the Czech Republic, Greece, Hungary, Israel and Poland. We found empirical evidence that the regional aspect played a dominant role in the intensity of the spillover effects. We found no empirical evidence that the pressures on exchange rates, interest rates and stock markets were primarily influenced by the exchange rate regime in place. Our findings do not support the commonly held view that flexible regimes are the best choice for small open emerging market economies exposed to volatile capital flows. [source] International liquidity swaps: is the Chiang Mai Initiative pooling reserves efficiently?INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2008E. Kohlscheen Abstract We analyse the network of bilateral liquidity swaps (BSAs) among the ASEAN+3 countries. We find that the network has taken the correlation of capital flows in the region into account, in the sense that countries with lower correlation of reserve growth have engaged in larger BSAs. All else equal, a decimal point increase in the correlation of international reserve growth decreases the size of a bilateral swap agreement between 18% and 27%. Moreover, we find that the approximately $ 60,bn of BSAs have had a limited impact, if any, on government bond spreads so far. Finally, we identify potential gains from inter-regional BSAs. Copyright © 2008 John Wiley & Sons, Ltd. [source] A tale of two ,globalizations': capital flows from rich to poor in two eras of global financeINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2006Moritz Schularick Abstract In this paper we take a comparative look at the patterns of capital flows from rich to poor countries in two eras of financial globalization. The paper extends recent research on the developmental effects of international financial integration, long-term trends in capital mobility and ,globalization in historical perspective'. Analysing the patterns of international financial integration in the three decades of the classical gold standard and after 1990 we show that investment in developing countries was a central element of 19th century financial globalization, but plays only a minor role today. The Lucas paradox of capital failing to flow from rich to poor has grown much stronger. In historical perspective, today's financial globalization is marked by massive diversification flows between high-income economies and a relative marginalization of less-developed economies. Copyright © 2006 John Wiley & Sons, Ltd. [source] Modelling fundamentals for forecasting capital flows to emerging marketsINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2001Ashoka Mody F21; F34 Abstract In this paper, we provide capital flow forecasts to 32 developing countries using a vector error correction framework based on underlying domestic (pull) fundamentals and international (push) factors. In general, pull factors have a heavier weight in determining these capital flows. However, short-term dynamics of capital flows can be significantly influenced by external developments. Simulations under various economic scenarios show that while financial variables (such as the US interest rate and high-yield spread) are important, real US activity may be even more potent in influencing capital flow movements. Copyright © 2001 John Wiley & Sons, Ltd. [source] TRANSFORMING ENRON: THE VALUE OF ACTIVE MANAGEMENTJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2001Vince Kaminski Soon after Enron was formed as a regulated gas pipeline company in 1985, economic events forced a dramatic reorganization of the company. The result was the creation of an unregulated energy trading operation whose mission was to capitalize on opportunities arising from the deregulation of the natural gas market The initial form of the new business was that of a "gas bank" in which Enron became an intermediary between buyers and sellers of gas, locking in the spread as profit. Since there was no source of liquidity to the market, Enron had to develop its own risk management system. Furthermore, the need to respond quickly to rapidly changing market conditions required that Enron flatten its organizational structure and hire new people whose skills were better suited to the new decentralized organization. The focus of the new Enron accordingly became human and intellectual capital, not physical assets. Employees were encouraged to move about the firm to staff new business ventures. And in what may well be a unique feature in corporate America, Enron's top management today uses its human capital flows to guide its allocations of financial capital. Other aspects of the Enron model include attempts to capitalize on the option (as opposed to current DCF) value of assets, recognition of the value of networks in adding value to trading platforms, and the use of mark-to-market accounting for business transactions as a means of ensuring transparency and promoting timely decision-making. [source] The transmission mechanism in a changing worldJOURNAL OF APPLIED ECONOMETRICS, Issue 1 2007Michael Artis The paper aims to identify those factors that cause changes in the speed and strength of the international transmission of output shocks from the USA to specified European economies. These factors are identified through the use of generalized impulse response functions conditioned on histories defined by an abrupt transition VAR. The chosen transition variables comprise changes in exchange rates, financial prices, international capital flows, trade links and monetary policy instruments. Besides the identification of asymmetric responses, the proposed model is useful in analyzing the strong effect of the recent US recession on the European economies and changes in business cycle synchronization over time. Copyright © 2007 John Wiley & Sons, Ltd. [source] THE UNDERPINNINGS OF COUNTRY RISK ASSESSMENTJOURNAL OF ECONOMIC SURVEYS, Issue 3 2008Susan K. Schroeder Abstract This paper surveys the history and current status of country risk assessment. The motivation is to understand why it is that country risk assessors have such a poor track record in anticipating the onset of financial crises. The development of the field reflects changes in the composition of international capital flows. These changes have confounded a definition of country risk, especially if a definition is centered on a particular event. It is then argued that the field has reached an impasse, and this impasse is related to the methods of abstraction and the current crisis of vision within the science of economics. This crisis of vision, as it pertains to theories of financial crises, has led to increased reliance on quantitative methods in the field of country risk. The paper concludes by proposing a new direction for the field, the first step towards which is to recognize that the object of country risk assessment is not to monitor for a particular event or symptom of financial crisis, but, rather, to monitor for a particular state of the economy. [source] African capital markets and real sector investmentJOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 4 2005Yohane Khamfula Many African capital markets find the lack of an efficiently organized capital market a serious obstacle to the efficient use of their savings, and thus to their overall economic development. To improve the situation, this paper suggests the following policy recommendations: removal of impediments to capital market development, improvement of the financial system infrastructure for efficient trading activities, sound economic policies that stabilize the exchange rate and prices to help attract foreign investors, increased integration of the local capital market with the world capital markets, encouragement of family-owned firms to go public and, most importantly, liberalization of international capital flows. The study also proposes ,privatization' and ,currency union' as enhancers of capital mobilization for real sector investment in Africa. Copyright © 2005 John Wiley & Sons, Ltd. [source] Environmental Regulations and New Plant Location Decisions: Evidence from a Meta-AnalysisJOURNAL OF REGIONAL SCIENCE, Issue 1 2002Tim Jeppesen Stricter environmental regulations are often opposed on the grounds that they will alter equilibrium capital flows. Empirical evidence in this area remains largely unresolved, mainly due to the quite disparate results found in the literature. This paper takes a positive look at the relationship between new manufacturing plant location decisions and environmental regulations by examining data from 11 studies that provide more than 365 observations. One major result from our meta-analysis is that methodological considerations play a critical role in shaping the body of received estimates. Our empirical estimates also lend insights into future research that is necessary before any robust conclusions can be made regarding the effects of environmental regulations on capital flows. [source] Government size and openness revisited: the case of financial globalizationKYKLOS INTERNATIONAL REVIEW OF SOCIAL SCIENCES, Issue 3 2009Alena Kimakova SUMMARY The volatility of international capital flows to emerging markets has been well documented. Financial globalization may not in general fulfill its theoretical role as a risk sharing mechanism in financially underdeveloped economies, and hence may provide an impetus for compensating government spending. Comparative studies of the public sector have provided evidence of a robust positive association between government size and openness of the economy to trade flows. This paper extends the existing literature by investigating the relationship between government size and financial openness for 87 developing and developed countries between 1976 and 2003. The analysis reveals a positive relationship between exposure to international capital flows and government size. Furthermore, interacting capital flows with income levels shows that richer open economies tend to have smaller government size. These findings are consistent with the hypothesis that benefits of financial integration, in terms of improved risk-sharing and consumption smoothing, accrue only beyond a certain minimum level of financial development. [source] Globalization and Pension Reform in Latin AmericaLATIN AMERICAN POLITICS AND SOCIETY, Issue 4 2007Sarah M. Brooks ABSTRACT While financial globalization has created powerful incentives for Latin American governments to privatize old age pension systems, reliance on short-term capital flows has also constrained the ability of cash-strapped governments to enact that reform. Analysis of the technocratic process of pension reform in Argentina and Brazil provides evidence. Instead of simply generating unidirectional pressures for structural pension reform, financial globalization has created a double bind for Latin America's capital-scarce governments, fostering long-term incentives to privatize pension systems while heightening the risk of punishment in the short term. [source] The Impact of Short- and Long-run Exchange Rate Uncertainty on Investment: A Panel Study of Industrial Countries,OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 3 2005Joseph P. Byrne Abstract We examine the relationship between aggregate investment and exchange rate uncertainty in the G7, using panel estimation and decomposition of volatility derived from the components generalized autoregressive conditionally heteroscedastic (GARCH) model. Our dynamic panel approach takes account of potential cross-sectional heterogeneity, which can lead to bias in estimation. We find that for a poolable subsample of European countries, it is the transitory and not the permanent component of volatility which adversely affects investment. To the extent that short-run uncertainty in the CGARCH model characterizes higher frequency shocks generated by volatile short-term capital flows, these are most deleterious for investment. [source] Globalization and the Strengthening of Democracy in the Developing WorldAMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 4 2005Nita Rudra Scholars and policy makers have long assumed that trade and financial liberalization encourages developing countries to become more democratic; yet no one has developed formal hypotheses about the causal relationship between globalization and democracy. This article shows that these two trends are indeed related, but not necessarily in the direct manner that has commonly been postulated. Combining theories of embedded liberalism and conflict-based theories of democracy, the model presented here depicts the process that affects decisions to strengthen democracy as trade and capital flows increase. I argue that increasing exposure to international export and financial markets leads to improvements in democracy if safety nets are used simultaneously as a strategy for providing stability and building political support. Empirical evidence is provided by econometric analysis covering 59 developing countries for the time period 1972,97. [source] | ||||||||||||||||||||||||||||