Economics at your fingertips  

Global governance and gross capital flows dynamics

Nataliia Osina ()
Additional contact information
Nataliia Osina: Alliance Manchester Business School

Review of World Economics (Weltwirtschaftliches Archiv), 2021, vol. 157, issue 3, No 2, 463-493

Abstract: Abstract One of the famous puzzles in macroeconomics, the Lucas (Am Econ Rev 80:92–96, 1990) paradox on “why doesn’t capital flow from rich to poor countries”, continues to exist and shapes capital flows in the modern world. This paper provides cross-country evidence on the role of politico-institutional and financial determinants in gross capital flows dynamics over the period 2000–2016. Using panel regressions incorporating country fixed effects, the study argues that institutional quality rather than the effect of diminishing returns of capital is a key explanation for the “Lucas Paradox”. It corroborates previous empirical evidence that government effectiveness, regulatory quality, rule of law, and political stability remain the most important institutional indicators in determining gross capital flows dynamics, highlighting the symmetric effect. In contrast, voice and accountability, and corruption are not significant determinants of gross capital outflows dynamics. The main contribution of the paper comes in identifying the link between the multidimensional nature of financial development and gross capital flows. The empirical results highlight the significance of the differences in gross capital inflows/outflows depending on the country’s level of financial development. The study shows the significance and predominance of financial institutions versus financial markets in the dissemination of gross capital flows.

Keywords: Lucas Paradox; Global governance; Financial development; Gross capital flows dynamics; Feldstein-Horioka puzzle (search for similar items in EconPapers)
JEL-codes: F30 F34 F62 F63 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2

DOI: 10.1007/s10290-020-00404-z

Access Statistics for this article

Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-11-13
Handle: RePEc:spr:weltar:v:157:y:2021:i:3:d:10.1007_s10290-020-00404-z