Global capital flows and development: A Survey

Abstract

From a development perspective, capital flows can both provide significant benefits and entail significant costs. Consequently, the development impacts of capital flows do not readily lend themselves to simple generalizations. This survey considers the development benefits and costs of four kinds of capital flows: foreign direct investment, equity portfolio investment, bond finance, and commercial bank lending. The survey suggests that the development impacts of these flows are conditional on both their specific characteristics and the larger policy environments in which they take place. It claims short-term superiority for foreign direct investment and equity portfolio investment over bond finance and commercial bank lending, and offers a set of policy recommendations to make capital flows more development-friendly.Capital flows, foreign direct investment, financial development,

Ideas, Development, and Globalization

“…As emphasized by Goldin and Reinert (2007), however, a more useful typology for analyzing globalization and development issues is a fivefold one of trade, capital flows, aid, migration, and ideas." Here we are focusing on the last of these dimensions-ideas.…”

International Capital Flows Within the European Monetary Union: Increasing Economic Divergence Between the Centre and the Periphery

“…All these imbalances across Euroland are likely to push its member countries to introduce defl ationary wage policies to compete with Germany, increasing defl ationary pressures across the EMU. Countries, 1999-2005Country 199920002001200220032005-2005 Austria -3. Further, as current account imbalances are mirrored by capital account imbalances that change the net-debtor / net-creditor position of a country, and hence the associated net factor income fl ows, there is an increasing divergence between the value of output produced within a given EMU member country and the total amount of income earned and of bank deposits owned by its residents.…”

“…Th is limits economic growth and increases unemployment rates, particularly within those EMU countries, like Germany and other core countries of Euroland, that suffer most from the anti-infl ationary policy that the ECB has been implementing so far, as revealed by the evolution of the adjusted wage share across the EMU (see Rochon / Rossi 2006 in this respect). Countries (), 1999-2006Country 1999200020012002200320052006-2006 Note: Data refer to the year-to-year percentage variation of the HICP.…”

“…In fact, outside its capital town, Greece has not benefi ted much from joining the Euro area in terms of economic growth and development. Countries (), 1999-2008Country 199920002001200220032005200620072008 the existence and persistence of infl ation rate diff erentials within the Euro area as measured through the Harmonised Index of Consumer Prices (HICP) (table 9), real interest rates are not yet the same across that area. Th is gives rise to diff erent costs of borrowing for investment projects (table 10), and may also explain some growth diff erentials in both GDP and employment levels between the EU-12 countries over the EMU period so far (recall tables 6 and 7).…”