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Capital flows and GDP in emerging economies and the role of global spillovers

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  • Beckmann, Joscha
  • Czudaj, Robert
Abstract
This paper provides a global analysis of capital flow impacts on GDP for selected emerging economies. As additional control variables, we also include currency reserves and effective exchange rates in our analysis. We distinguish between gross and net capital flows and also assess the impact of both FDI and portfolio flows. Accounting for the fact that common factors have been the main drivers of capital flows while country-specific determinants (‘pull’ factors) drive the response to such shocks, we analyze shocks to country groups but consider country-specific responses based on a Bayesian time-varying panel VAR framework in the spirit of Canova and Ciccarelli (2009). Based on a sample of 24 economies, our results show a robust positive effect of capital flows on GDP. Except for Korea, both gross and net capital flows display a positive impact for around two quarters. The impact of effective exchange rates on GDP hardly offers an explanation for a possible transmission of capital flow effects with effective depreciations both positively and negatively linked to GDP. We also find that the effect of net portfolio flows is even more positive compared to net FDI flows for emerging economies. Finally, we provide evidence that the importance of global factors increases in times of crises.

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  • Beckmann, Joscha & Czudaj, Robert, 2017. "Capital flows and GDP in emerging economies and the role of global spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 140-163.
    • Handle: RePEc:eee:jeborg:v:142:y:2017:i:c:p:140-163
    DOI: 10.1016/j.jebo.2017.07.031
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    3. Eller, Markus & Huber, Florian & Schuberth, Helene, 2020. "How important are global factors for understanding the dynamics of international capital flows?," Journal of International Money and Finance, Elsevier, vol. 109(C).
    4. Yu Chen & Keyang Li & Qian Zhou & Yuxin Zhang, 2022. "Can Population Mobility Make Cities More Resilient? Evidence from the Analysis of Baidu Migration Big Data in China," IJERPH, MDPI, vol. 20(1), pages 1-25, December.
    5. Alimov, Behzod, 2022. "The dynamic effects of debt and equity inflows: Evidence from emerging and developing countries," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    6. Pravakar Sahoo & Ranjan Kumar Dash & Yoon Jung Choi, 2021. "Do Absorptive Capacities matter for FPI-Growth Nexus? Evidence from Cross-country Analysis," IEG Working Papers 435, Institute of Economic Growth.
    7. Mansur, Alfan, 2023. "Capital flow volatility regimes and monetary policy dilemma: Evidence from New Zealand," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    8. Bingqiang Li & Xi Li & Jinzhi Li & Hongchun Lin & Baojuan Rui, 2023. "Empirical Analysis of Export Tax Rebate on Inwards Foreign Direct Investment in China," SAGE Open, , vol. 13(4), pages 21582440231, December.
    9. Ajisafe Rufus Adebayo & Okunade Solomon Oluwaseun, 2020. "International Capital Inflow and Sub-Saharan African Economy: Does Capital Inflow Lead Growth?," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 26-34.
    10. Bhandari, Krishna Raj & Zámborský, Peter & Ranta, Mikko & Salo, Jari, 2023. "Digitalization, internationalization, and firm performance: A resource-orchestration perspective on new OLI advantages," International Business Review, Elsevier, vol. 32(4).
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    More about this item

    Keywords

    C32; F31; F32; Bayesian econometrics; Capital flows; Exchange rates; FDI; Panel VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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