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GLOBALISATION AND GOVERNANCE: THRESHOLDS FOR THE IMPACTS OF THE MAIN DETERMINANTS OF CAPITAL INFLOWS?

Erdal Özmen () and Fatma Taşdemir
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Erdal Özmen: Department of Economics, Middle East Technical University, Ankara, Turkey

No 1902, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: This paper investigates whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated threshold levels for structural domestic conditions (SDC) represented by governance/institutional quality, trade openness, de facto international financial integration and de jure financial openness in emerging market and developing economies. Our results strongly suggest that, for all the components of capital inflows, the impact of the domestic pull factor is substantially much higher for the episodes of better governance, higher trade and de jure financial openness and de facto international financial integration. The sensitivity of non-FDI and aggregate inflows to GFC is highly significant and tends to be considerably higher for countries with better SDC. FDI inflows are found to be basically determined by the domestic pull factor across all these regimes. The impact of GFC on FDI inflows appears not to considerably change across the SDC.

Keywords: Capital Inflows; Developing Countries; Emerging Market Economies; International Financial Integration; Financial Openness; Foreign Direct Investments; Global Financial Conditions; Governance; Panel Threshold Model (search for similar items in EconPapers)
JEL-codes: E02 F21 F30 F32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-mac
Date: 2019-03, Revised 2019-03
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