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Openness and capital flow volatility: comparisons between transition economies and Latin America

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  • Scott Hegerty

Abstract

The transition economies of Eastern Europe, much like Latin America, have attracted a great deal of capital and thus become vulnerable to external crises. As a result, assessing the volatility of capital movements, and distinguishing between stable and transitory flows, is particularly important. This study looks at nine transition and six Latin American countries individually, modelling Foreign Direct Investment (FDI), portfolio and other inflows separately as functions of macroeconomic variables that include economic openness. Cointegration analysis shows that Latin American flows seem to experience more of a reduction in volatility due to increased openness, suggesting that this region enjoys more risk-sharing as a result of financial integration than do transition economies.

Suggested Citation

  • Scott Hegerty, 2011. "Openness and capital flow volatility: comparisons between transition economies and Latin America," Applied Economics Letters, Taylor & Francis Journals, vol. 18(12), pages 1177-1180.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:12:p:1177-1180
    DOI: 10.1080/13504851.2010.528355
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    Cited by:

    1. Charles Sawyer W. & B. Wooster Rossitza & R. Blanco Luisa, 2015. "Does Experience Matter for Patterns of Expansion by US Companies in Latin America and the Caribbean?," Global Economy Journal, De Gruyter, vol. 15(1), pages 1-24, March.
    2. Förster, Marcel & Jorra, Markus & Tillmann, Peter, 2014. "The dynamics of international capital flows: Results from a dynamic hierarchical factor model," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 101-124.
    3. Kuziva Mamvura & Mabutho Sibanda & Rajendra Rajaram, 2020. "Causal Dynamics among Foreign Portfolio Investment Volatility, Financial Deepening and Capital Markets in Low Income Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 70(1-2), pages 20-38, January-J.
    4. Ma, Yong & Jiang, Yiqing & Yao, Chi, 2022. "Trade openness, financial openness, and macroeconomic volatility," Economic Systems, Elsevier, vol. 46(1).

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