Not all capital waves are alike: a sector-level examination of surges in FDI inflows

Dennis Reinhardt and Salvatore Dell'Erba ()
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Salvatore Dell'Erba: Graduate Institute of International and Development Studies, Geneva

No 474, Bank of England working papers from Bank of England

Abstract: We examine episodes of large gross foreign direct investment (FDI) inflows - surges - at the sectoral level in emerging market economies. We find that surges in the financial sector, unlike surges in the non-financial sectors, are associated with boom-bust cycles in GDP and expansions of credit in foreign currency. In terms of the determinants of surges, we find that global and contagion factors have a stronger effect in the financial than the non-financial sectors. We also document a role for policies related to capital account openness: restrictions on other forms of capital inflows tend to increase the likelihood of surges in financial sector FDI.

Keywords: Foreign direct investment; surges; capital flow determinants; sectoral level; emerging market economies (search for similar items in EconPapers)
JEL-codes: F21 F32 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-06-14
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0474

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