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Revisiting capital flow drivers: Regional dynamics, constraints, and geopolitical influences

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  • Ftiti, Zied
  • Ben Ameur, Hachmi
  • Louhichi, Wael
  • Anastasiou, Dimitris
  • Awijen, Haithem

Abstract

Our study revisits the drivers of capital flow movement by considering push, pull, and contagion factors for two distinct economic areas: BRICS and a group of European countries. This research was prompted by intensified regional integration and geopolitical challenges, which led to a concentration of regional investments. Major geopolitical events, such as Russian sanctions and the US–China conflict, have spurred capital shifts from affected areas. Based on our regional perspective analysis, we introduce capital flow constraints as an additional driver of capital movement. Our panel data analysis reveals two key insights: Firstly, unlike Europe, which mainly generates outflows, BRICS nations primarily attract capital inflows driven by internal and global influences. Secondly, BRICS exhibits higher sensitivity to capital inflow constraints, whereas Europe is more responsive to outflow constraints. Overall, our research highlights the distinct capital flow trends in BRICS and Europe, driven by their unique economic and geopolitical contexts.

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  • Ftiti, Zied & Ben Ameur, Hachmi & Louhichi, Wael & Anastasiou, Dimitris & Awijen, Haithem, 2024. "Revisiting capital flow drivers: Regional dynamics, constraints, and geopolitical influences," Journal of International Money and Finance, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000366
    DOI: 10.1016/j.jimonfin.2024.103049
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    2. António Afonso & José Alves & Lucas Menescal & Sofia Monteiro, 2024. "Determinants of trade partner concentration: An analysis for European countries," Working Papers REM 2024/0356, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    3. Maksim V. Petrov, 2024. "The Impact of Geopolitical Tensions on International Capital Flows," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 8-22, June.

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    More about this item

    Keywords

    Capital flows; Inflows; Outflows; FDI flows; Equity flows; Capita constraints;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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