Short -Term Capital Flows and Growth in Developed and Emerging Markets

Pavlos Petroulas

No 60, Working Papers from Bank of Greece

Abstract: A lot of attention has been directed towards recent financial crises around the world. Empirical studies have found that short-term flows increase financial fragility and increase also the probability of financial crises. This study takes a macro-oriented approach and shows that while large and volatile short-term flows have no effect on growth for rich countries, they are growth inhibiting for emerging markets. These results are robust to a large variety of estimation methods and pass stringent extreme bound analysis criteria. Moreover, their magnitude turns out to be of economic importance. The analysis indicates that opening up emerging markets' capital accounts, which implies increased short-term capital flows, is not a clear-cut way to prosperity.

Keywords: Capital flows; Growth; Financial crises; Panel data (search for similar items in EconPapers)
JEL-codes: C23 F32 F34 F43 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-04
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:60

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