 Joining the club? Procyclicality of private capital inflows in lower income developing economiesJuliana D. Araujo, Antonio David, Carlos Eduardo van Hombeeck and Chris Papageorgiou () Journal of International Money and Finance, 2017, vol. 70, issue C, 157-182 Abstract: Using a newly developed dataset this paper examines the cyclicality of private capital inflows to low-income developing countries (LIDCs). The empirical analysis shows that capital inflows to LIDCs are procyclical, yet considerably less procyclical than flows to more advanced economies. The analysis also suggests that flows to LIDCs are more persistent than flows to emerging markets (EMs). There is also evidence that changes in risk aversion are a significant correlate of private capital inflows with the expected sign, but LIDCs seem to be less sensitive to changes in global risk aversion than EMs. A host of robustness checks to alternative estimation methods and control variables confirm the baseline results. In terms of policy implications, these findings suggest that private capital inflows are likely to become more procyclical as LIDCs move along the development path, which could render the conduct of countercyclical monetary and fiscal policies more challenging in these economies. Keywords: Capital flows; Cyclicality; Low-income developing countries (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:jimfin:v:70:y:2017:i:c:p:157-182 DOI: 10.1016/j.jimonfin.2016.08.006 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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