Foreign portfolio investment has been growing since the beginning of the
1990's and the fall in portfolio investment stock due to the global
financial crisis in 2008 was reverted after two years. The determinants of
foreign portfolio investment and foreign total investment are estimated for
dynamic panels of emerging economies from 2007 to 2014 using the Generalized
Method of Moments (GMM). With respect to movements in portfolio investment,
predictors of sovereign risk, U.S. stock market performance, domestic
investment and fiscal performance are statistically significant. In regard
to foreign total investment, predictors of sovereign risk, Fed Funds rate,
domestic investment, current account balance, fiscal performance and real
exchange rates are statistically significant. Domestic and foreign variables
are both important to explain capital flows. Hence, in general results show
that emerging economies might coordinate economic policy with the adopted
external funding strategy.