Volatility of short term capital flows, financial anarchy and private investment in emerging markets

Firat Demir

MPRA Paper from University Library of Munich, Germany

Abstract: Using micro-level panel data, the paper analyses the impacts of short-term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets that are Argentina, Mexico and Turkey. The empirical results including comprehensive sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms. Accordingly, a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1-1.7, 2.3-15.1, and 1 per cent in Argentina, Mexico and Turkey respectively.

Keywords: Capital Flow Volatility; Macroeconomic Uncertainty; Private Investment; Financial Liberalisation (search for similar items in EconPapers)
JEL-codes: C33 F32 F43 O16 O57 (search for similar items in EconPapers)
Date: 2006-10, Revised 2007-05
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3080

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