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Globalisation And Governance: Thresholds For The Impacts Of The Main Determinants Of Capital Inflows?

Author

Listed:
  • Erdal Özmen

    (Department of Economics, Middle East Technical University, Ankara, Turkey)

  • Fatma Taşdemir

    (Department of Economics, Sinop University, Sinop, Turkey)

Abstract

This paper investigates whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated threshold levels for structural domestic conditions (SDC) represented by governance/institutional quality, trade openness, de facto international financial integration and de jure financial openness in emerging market and developing economies. Our results strongly suggest that, for all the components of capital inflows, the impact of the domestic pull factor is substantially much higher for the episodes of better governance, higher trade and de jure financial openness and de facto international financial integration. The sensitivity of non-FDI and aggregate inflows to GFC is highly significant and tends to be considerably higher for countries with better SDC. FDI inflows are found to be basically determined by the domestic pull factor across all these regimes. The impact of GFC on FDI inflows appears not to considerably change across the SDC.

Suggested Citation

  • Erdal Özmen & Fatma Taşdemir, 2019. "Globalisation And Governance: Thresholds For The Impacts Of The Main Determinants Of Capital Inflows?," ERC Working Papers 1902, ERC - Economic Research Center, Middle East Technical University, revised Mar 2019.
    • Handle: RePEc:met:wpaper:1902
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital Inflows; Developing Countries; Emerging Market Economies; International Financial Integration; Financial Openness; Foreign Direct Investments; Global Financial Conditions; Governance; Panel Threshold Model;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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