The Composition of Capital Flows: Is South Africa Different?

Norbert Funke, Faisal Ahmed and Rabah Arezki ()

No 05/40, IMF Working Papers from International Monetary Fund

Abstract: Over the past decade, South Africa has attracted relatively little foreign direct investment (FDI), but considerable amounts of portfolio inflows. In this context, the objective of the paper is twofold: to identify the determinants of the level and composition of capital flows to emerging markets and to draw policy conclusions for South Africa. We estimate a dynamic panel for up to 81 emerging markets using GMM (Generalized Method of Moments) techniques. The results suggest that further trade and capital control liberalization would increase the share of FDI. Additionally, a reduction in exchange rate volatility would affect the composition of capital flows in favor of FDI.

Keywords: Capital flows; South Africa; Exchange rates; Foreign investment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-fmk and nep-ifn
Date: 2005-03-11
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