Determinants of Capital Flows: A Cross-Country Analysis

Mukesh Ralhan

No 601, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: There are two basic approaches to identifying the determinants of capital flows, viz. the traditional and the portfolio (or modern) approach. Although most econometric models have by now forsaken the traditional capital flow equations in favour of modelling financial linkages via arbitrage type interest rate parity relations, the importance of fundamentals in explaining particular capital flow developments cannot be denied (International Monetary Fund, 1992). This paper identifies the determinants of capital flows using the conventional approach, and is based on a cross-sectional study of eight countries, viz. Australia, India, Indonesia, Argentina, Brazil, Chile, Columbia and Mexico. Non-linear Seemingly Unrelated Regression estimation has been used to allow for cross-country effects in the error structure.

Keywords: Capital Flows; Seemingly Unrelated Regressions (SUR) Model (search for similar items in EconPapers)
JEL-codes: C3 F21 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2006-03-22
New Economics Papers: this item is included in nep-dev, nep-fmk, nep-ifn and nep-mon
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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