[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/2392.html
   My bibliography  Save this paper

What factors appear to drive private capital flows to developing countries? and how does official lending respond?

Author

Listed:
  • Dasgupta, Dipak
  • Ratha, Dilip
Abstract
The authors study what drives private capital flows to developing countries, as well as the apparent response of official lending for the years 1978-97. Econometric results reveal that non-foreign direct investment portfolio flows to a country tended to rise in response to: 1) An increase in the current account deficit. 2) A rise in foreign direct investment flows. 3) Higher per capita income. 4) Growth performance. Once those variables were accounted for, private flows did not seem to be influenced by location, and regional factors. In addition, private capital flows (whether foreign direct investment or not) seem to respond positively (with a one-year lag) to World Bank lending commitments. By far the most important determinant of official lending to a developing country, seems to be the external current account balance, or a change in international reserves in the country. Official flows - including World Bank lending - appear to have played a stabilizing (or counter-cyclical) role in response to the volatility of private capital flows, and fluctuations in commodity prices, and GDP growth. (The stabilizing effect is weak, as official flows are only one-tenth of total long-term flows).

Suggested Citation

  • 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.
    • Handle: RePEc:wbk:wbrwps:2392
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/08/19/000094946_00080705302231/Rendered/PDF/multi_page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April.
    2. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    4. Reinhart, Carmen & Montiel, Peter, 2001. "The Dynamics of Capital Movements to Emerging Economies During the 1990s," MPRA Paper 7577, University Library of Munich, Germany.
    5. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    6. Rodrik, Dani, 1995. "Why is there Multilateral Lending?," CEPR Discussion Papers 1207, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Valpy FitzGerald & Derya Krolzig, 2004. "Modelling the demand for emerging market assets," Money Macro and Finance (MMF) Research Group Conference 2003 29, Money Macro and Finance Research Group.
    2. Valpy FitzGerald & Derya Krolzig, 2003. "Modeling the Demand for Emerging Market Assets," OFRC Working Papers Series 2003fe10, Oxford Financial Research Centre.
    3. Shashank Goel & V. Raveendra Saradhi, 2015. "Capital Flow Components and the Real Exchange Rate: Implications for India," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 14(2), pages 179-194, December.
    4. Stijn Claessens & Daniel Oks & Rossana Polastri, 2000. "Capital Flows to Central and Eastern Europe and the Former Soviet Union," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 299-339, National Bureau of Economic Research, Inc.
    5. Reinhart, C.M. & Dunaway, S., 1996. "Dealing with Capital Inflows. Are There Any Lessons?," Research Paper 28, World Institute for Development Economics Research.
    6. Clara Garcia, 2004. "Capital Inflows, Policy Responses, and Their Ill Consequences: Thailand, Malaysia, and Indonesia in the Decade Before the Crises," Working Papers wp81, Political Economy Research Institute, University of Massachusetts at Amherst.
    7. Mr. Rodrigo O. Valdes & Mr. Leonardo Hernández & Ms. Pamela Melado, 2001. "Determinants of Private Capital Flows in the 1970's and 1990's: Is there Evidence of Contagion?," IMF Working Papers 2001/064, International Monetary Fund.
    8. Naveen Srinivasan & Vidya Mahambare & M. Ramachandran, 2015. "Capital Controls, Exchange Market Intervention and International Reserve Accumulation in India," Working Papers 2015-103, Madras School of Economics,Chennai,India.
    9. Heng, Dyna, 2011. "Capital flows and real exchange rate: does financial development matter?," MPRA Paper 48553, University Library of Munich, Germany, revised May 2012.
    10. Bianchi, Benedetta & Galstyan, Vahagn & Herzberg, Valerie, 2022. "Global risk and portfolio flows to emerging markets: Evidence from irish-resident investment funds," Journal of International Money and Finance, Elsevier, vol. 123(C).
    11. Diaz Weigel, Diana & Gemmill, Gordon, 2006. "What drives credit risk in emerging markets? The roles of country fundamentals and market co-movements," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 476-502, April.
    12. Hardik A. Marfatia, 2016. "The Role of Push and Pull Factors in Driving Global Capital Flows," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 62(2), pages 117-146.
    13. Mr. Fabio Comelli, 2015. "Estimation and out-of-sample Prediction of Sudden Stops: Do Regions of Emerging Markets Behave Differently from Each Other?," IMF Working Papers 2015/138, International Monetary Fund.
    14. Serge Jeanneau & Marian Micu, 2002. "International bank lending to emerging market countries: explaining the 1990s roller coaster," BIS Quarterly Review, Bank for International Settlements, March.
    15. Konopczak, Michal, 2015. "Government debt holdings of non-residents – an analysis of the impact on selected emerging economies’ sovereign risk," MPRA Paper 68597, University Library of Munich, Germany.
    16. Reinhart, Carmen & Calvo, Guillermo & Fernandez Arias, Eduardo & Talvi, Ernesto, 2001. "Growth and External Financing in Latin America," MPRA Paper 9074, University Library of Munich, Germany.
    17. Galindo, Arturo J. & Panizza, Ugo, 2018. "The cyclicality of international public sector borrowing in developing countries: Does the lender matter?," World Development, Elsevier, vol. 112(C), pages 119-135.
    18. Qian, Xingwang & Steiner, Andreas, 2017. "International reserves and the maturity of external debt," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 399-418.
    19. Yuko Hashimoto & Konstantin M. Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 124, Courant Research Centre PEG.
    20. Fernando Arias & David Delgado & Daniel Parra & Hernán Rincón-Castro, 2016. "Gross Capital Flows and their long-term Determinants for Developing Economies: A Panel Co-integration Approach," Borradores de Economia 932, Banco de la Republica de Colombia.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2392. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.