The Composition of Capital Flows: Is South Africa Different?

By Norbert Funke, Faisal Ahmed, Rabah Arezki

March 1, 2005

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Format: Chicago

Norbert Funke, Faisal Ahmed, and Rabah Arezki. The Composition of Capital Flows: Is South Africa Different?, (USA: International Monetary Fund, 2005) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Over the past decade, South Africa has attracted relatively little foreign direct investment (FDI), but considerable amounts of portfolio inflows. In this context, the objective of the paper is twofold: to identify the determinants of the level and composition of capital flows to emerging markets and to draw policy conclusions for South Africa. We estimate a dynamic panel for up to 81 emerging markets using GMM (Generalized Method of Moments) techniques. The results suggest that further trade and capital control liberalization would increase the share of FDI. Additionally, a reduction in exchange rate volatility would affect the composition of capital flows in favor of FDI.

Subject: Capital flows, Capital inflows, Emerging and frontier financial markets, Exchange rates, Foreign direct investment

Keywords: Capital, Portfolio, Portfolio flow, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/040
Stock No:

WPIEA2005040
ISBN:

9781451860597
ISSN:

1018-5941

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