 Surges of cross border capital flow: The impact of digital financeQin Gou, Xingshen Li and Guojun Zhao Pacific-Basin Finance Journal, 2024, vol. 84, issue C Abstract: In this paper, we empirically investigate whether and how digital finance development affects the probability of cross border capital inflow surges. Based on cross country datasets for 120 countries from 2000 to 2021, we mainly find that with a higher level of digital finance development, a country is more likely to experience capital inflow surges. We provide further evidence that digital finance promotes surges through two mechanisms: (1) financial convenience mechanism, where digital finance provides more convenient financial access and payment which enables large-scale capital inflows; (2) the contagion mechanism that investors’ sentiment may spread more broadly and rapidly as digital technology develops in the digital era. These results are robust to endogeneity issue, measurement errors and sample selections bias test, and are heterogeneous in economic development, capital account openness and exchange rate flexibility. Findings in this paper uncover the risks in the development of digital finance in the cross-border context and prompt the necessity to improve the management on capital flows in the digital era. Keywords: Capital flow; Surge; Digital finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:84:y:2024:i:c:s0927538x24000568 DOI: 10.1016/j.pacfin.2024.102305 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.