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Capital flows and economic growth in the era of financial integration and crisis, 1990-2010

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  • Aizenman, Joshua
  • Jinjarak, Yothin
  • Park, Donghyun

Abstract

We investigate the relationship between economic growth and lagged internationalcapital flows, disaggregated into FDI, portfolio investment, equity investment, and shorttermdebt. We follow about 100 countries during 1990-2010 when emerging marketsbecame more integrated into the international financial system. We look at therelationship both before and after the global crisis. Our study reveals a complex andmixed picture. The relationship between growth and lagged capital flows depends on thetype of flows, economic structure, and global growth patterns. We find a large and robustrelationship between FDI – both inflows and outflows – and growth. The relationshipbetween growth and equity flows is smaller and less stable. Finally, the relationshipbetween growth and short-term debt is nil before the crisis, and negative during the crisis

Suggested Citation

  • Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2011. "Capital flows and economic growth in the era of financial integration and crisis, 1990-2010," Santa Cruz Department of Economics, Working Paper Series qt3003w1qd, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt3003w1qd
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    More about this item

    Keywords

    Social and Behavioral Sciences; Capital flows; economic growth; FDI; portfolio investment; equity investment; short-term debt; financial integration; financial crisis;
    All these keywords.

    JEL classification:

    • 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
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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