Short-Term Capital Flows and Growth in Developed and Emerging Markets Pavlos

Pavlos Petroulas

No 2004:4, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: A lot of attention has been directed towards recent financial crises around the world. It seems that financial markets are prone to herding, panics, contagion and boom-bust cycles. Empirical studies have found that short-term flows increase financial fragility and also increase the probability of financial crises. This study takes a macro-oriented approach and shows that large and volatile short-term flows may be growth inhibiting for emerging markets. This is not the case though for rich countries, where short-term capital flows have no effect on growth. The results in this study indicate that opening up emerging markets capital accounts, which imply increased short-term capital flows, is not a clear-cut way to prosperity.

Keywords: Capital flows; Growth; Financial crises; Panel data (search for similar items in EconPapers)
JEL-codes: C23 F32 F34 F43 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-05-24
New Economics Papers: this item is included in nep-fin and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2004_0004

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