Growing Up with Capital Flows

April 1, 2002

Preview Citation

Format: Chicago

Ashoka Mody, and Antu Panini Murshid. Growing Up with Capital Flows, (USA: International Monetary Fund, 2002) accessed November 21, 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

In a sample of 60 developing countries, we find evidence of a strong-almost one-to-one-relationship between capital inflows and domestic investment. However, this relationship has evolved over time. While growing financial integration with the rest of the world has increased access to foreign private capital, the relationship between foreign capital and domestic investment has weakened, reflecting changes in the composition of inflows, offsetting outflows, and increased foreign-currency reserve requirements. In contrast, better policies have not only brought in more capital but also, especially for foreign direct investment, have tended to strengthen the relationship between foreign capital and domestic investment.

Subject: Balance of payments, Capital account, Capital flows, Capital inflows, Financial integration, Financial markets, Foreign direct investment

Keywords: Capital account, Capital control, Capital flow, Capital flows, Capital inflows, Domestic investment, East Asia, FDI flow, Financial integration, Flow relationship, Flows-investment relationship, Foreign direct investment, Global, Portfolio flow, South Asia, Terms of trade, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/075
Stock No:

WPIEA0752002
ISBN:

9781451849745
ISSN:

1018-5941

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