Patterns of Capital Flows to Emerging Markets: A Theoretical Perspective

January 1, 1997

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Zhaohui Chen, and Mohsin S. Khan Patterns of Capital Flows to Emerging Markets: A Theoretical Perspective, (USA: International Monetary Fund, 1997) accessed October 5, 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

This paper reviews some of the basic patterns of international capital flows to emerging markets in recent years, including the composition of capital flows, intraregional flow patterns, and the geographical distribution of the flows. A theoretical model that sheds new light on these observed patterns is developed. This model focuses on the cost of financing aspect of capital flows, and shows that the patterns of capital flows are influenced by the combined effects of financial market development and growth potential in the recipient countries. The theoretical predictions of the model are shown to be consistent with the stylized facts.

Subject: Balance of payments, Capital flows, Capital inflows, Emerging and frontier financial markets, Financial markets, Foreign direct investment, Portfolio investment

Keywords: Asia and Pacific, Capital flow, Capital flows, Capital inflows, Contract and regulation, Cost of financing, Economy, Emerging and frontier financial markets, Emerging markets, Equity portfolio investor, Expected return, Foreign direct investment, Market, Market efficiency configuration, Market mechanism, Market parameter, Portfolio equity flow, Portfolio flow, Portfolio investment, Portfolio investment, Sub-Saharan Africa, Western Hemisphere, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/013
Stock No:

WPIEA0131997
ISBN:

9781451924947
ISSN:

1018-5941

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