Capital Flows and Financial Stability in Emerging Economies

Abstract

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Effect of capital flows on financial stability in middle-income countries

“…Stiglitz (2000) particularly advised against short-term capital flows but opined that FDI, on the other hand, leads to increased access to market, human capital, valuable training, technology and resources. This argument is supported by Baum et al (2017), who used 16 emerging and newly industrialized countries to examine whether different flows have different significant effects on financial stability for different economies. Using seemingly unrelated regression (SUR) method developed by Zellner (1962), six measures of gross capital flows and five financial variables for measuring financial stability, findings suggest that the effects of different measures of capital flows might not be equal across all countries.…”

“…While Dhal et al (2011) argue that financial stability, growth and inflation could share a medium- to long-term relationship and enhance financial stability associated with higher growth accompanied by stable interest rate. Baum et al (2017) found that after controlling for macroeconomic factors, the effect of capital flows on financial stability varies quite substantially across countries and interestingly across the various types of flows. In light of the above, this study, therefore, adopts inflation rate and GDP growth rate as control variables.…”

“…This study also provides control of macroeconomic indicators on financial stability. According to Baum et al (2017), controlling for macroeconomic factors have a significant effect on financial stability because of country-specific financial and macroeconomic characteristics. The study argues that prior to the financial crisis, advanced economies experience stable growth and low inflation in the presence of financial imbalances.…”

“…These statistics make this category of countries strategic and important for global financial flows. Baum et al (2017) posit that financial liberalization in developing economies is accompanied by instability and crises as a result of underdeveloped institutions and banking systems. On the contrary, domestic deregulation and opening of capital account drive stable financial system.…”

Research and methodological framework for managing the economic security of financial intermediaries in Ukraine

“…It is worth paying attention to Keliuotytė-Staniulėnienė (2015), Perciun et al (2014), and Semjonova (2016). Baum et al (2017) analyze financial security in the system of economic security of the state by study-ing the problems of capital flows and financial stability. Korauš et al (2016) address the problem of ensuring the banking component of the country's financial security.…”