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The volatility of capital flows to emerging markets and financial services trade

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  • Beck, Roland

Abstract

This paper examines empirically the question whether the presence of foreign banks and a liberal trade regime with regard to financial services can contribute to a stabilization of capital flows to emerging markets. Since foreign banks, so the argument goes, provide better information to foreign investors and increase transparency, the danger of herding is reduced. Previous findings by Kono and Schuknecht (1998) confirmed empirically that such an effect does exist. This study expands their data set with respect to the length of the time period and the number of countries. Contrary to Kono and Schuknecht, it is found that foreign bank penetration tends to rather increase the volatility of capital flows. The trade regime variables are not significant in explaining cross-country variations in the volatility of capital flows. This result does not change significantly when alternative measures of volatility are considered.

Suggested Citation

  • Beck, Roland, 2000. "The volatility of capital flows to emerging markets and financial services trade," CFS Working Paper Series 2000/11, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200011
    as

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    File URL: https://www.econstor.eu/bitstream/10419/25372/1/326511105.PDF
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    References listed on IDEAS

    as
    1. Mayer,Colin & Vives,Xavier (ed.), 1993. "Capital Markets and Financial Intermediation," Cambridge Books, Cambridge University Press, number 9780521443975, September.
    2. Agénor,Pierre-Richard & Miller,Marcus & Vines,David & Weber,Axel (ed.), 1999. "The Asian Financial Crisis," Cambridge Books, Cambridge University Press, number 9780521770804, September.
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    Cited by:

    1. Narayan Sethi, 2012. "Inflows and their Macroeconomic Impact in India a VAR Analysis," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 93-142, December.

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    More about this item

    Keywords

    Financial Services Trade; Capital Flows;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F30 - International Economics - - International Finance - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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