Joining the club? Procyclicality of private capital inflows in lower income developing economies

Araujo, Juliana Dutra; David, Antonio; Hombeeck, Carlos van; Papageorgiou, Chris

doi:10.1016/j.jimonfin.2016.08.006

Cited by 23 publications

(16 citation statements)

References 30 publications

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“…We show that the effectiveness of capital controls in emerging economies varies depending on the sector in which they are imposed-with controls on NFCs and OFCs appearing more effective than banking sector controls. In addition, the intra-sectoral procyclicality of resident and non-resident flows may exacerbate procyclicality in the domestic banking sector, adding another argument for a countercyclical approach to prudential policy (Araujo et al, 2017;Lane and McQuade, 2014).…”

Section: Introductionmentioning

confidence: 99%

Sectoral Capital Flows: Covariates, Co-movements, and Controls

Lepers

Mercado

2020

SSRN Journal

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This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies from 2000-18, including direct, portfolio, and other investment to and from five sectors: namely, central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs). Using this data, the paper highlights the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. We show that 1) sectoral flows have varying sensitivities to measures of the global financial cycle and different cyclicality with respect to output growth; 2) co-movements in intra-sectoral resident and non-resident and co-movements with OFC sectoral flows explain a large part of the observed positive correlation between gross inflows and outflows; and, 3) sectorspecific tightening capital control measures appear effective in reducing the volume of flows to NFCs and OFCs.

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Section: Introductionmentioning

confidence: 99%

Sectoral Capital Flows: Covariates, Co-movements, and Controls

Lepers

Mercado

2020

SSRN Journal

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“…In this stage, efficiency is a source of competitiveness, and countries must have efficient production processes and services. Finally, in the 2 See Ahmed and Zlate 2014;Araujo et al 2017;Binici et al 2010;Byrne and Fiess 2016;De Santis and Lührmann 2009;Forbes and Warnock 2012. 3 We exclude the in-transition countries that do not have the full characteristics of factor-, efficiency-, and innovation-driven economies.…”

Section: A Datamentioning

confidence: 99%

“…We include the WEF's "Market size" (MS) and "Macroeconomic environment" (ME) competitiveness pillar scores (i.e., macroeconomic absorptive capacity) as a proxy for trade openness and macroeconomic determinants, respectively. 6 We use the Volatility Index (VXO) of the Chicago Board Options Exchange as a proxy for measuring the global risk level and use the RCP index from the IMF International Financial Statistics (Brana and Lahet 2010;Forbes and Warnock 2012;Ahmed and Zlate 2014;Byrne and Fiess 2016;Araujo et al 2017).…”

Section: A Datamentioning

confidence: 99%

Nexus between Institutional Quality and Capital Inflows at Different Stages of Economic Development

Athari

Adaoglu

2017

Int Rev Finance

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We examine the determinants of capital inflows for a global sample of countries at various stages of economic development, namely factor‐, efficiency‐, and innovation‐driven stages. We investigate the effect of institutional quality on capital inflows. The magnitude of institutional quality effect depends on the stage of economic development. Both public and private institutional qualities positively affect capital inflows in efficiency‐ and innovation‐driven countries. Specifically, corporate ethics and accountability are pull factors for capital inflows at all stages.

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“…But when distinguishing by the lender of international government borrowing, there seems to be evidence of some heterogeneity in the behavior of capital flows. While private net lending to developing and emerging economies is procyclical (Galindo and Panizza 2018;Araujo et al 2017;Levy Yeyati 2009;Dasgupta and Ratha 2000), there is scarce literature that looks at the cyclicality of multilateral institutions, emphasizing their countercyclical role (Galindo and Panizza 2018;Humphrey and Michaelowa 2011;Dasgupta and Ratha 2000), or that analyses the IMF lending responsiveness in crises (McDowell, 2017;Mody and Saravia, 2013). 4 Some have also analyzed the reaction of capital flows to crises in more detail.…”

Section: Introductionmentioning

confidence: 99%

Sovereign External Borrowing and Multilateral Lending: Dynamics and Crises

Lotti¹,

Avellán²,

Galindo³

2018

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license. AbstractFiscal policy and net capital inflows in developing countries are procyclical. A large amount of literature has examined this phenomenon and explored its consequences for aggregate fluctuations. Multilateral development banks (MDBs) are an important source of external finance for governments and hence play a key role in financing the execution of fiscal policy. The literature has found evidence that government borrowing from MDBs is countercyclical, but how are MDB flows related to fiscal policy? Does this relationship depend on whether the government is running a deficit or a surplus, or would this relationship change if the sovereign is going through a fiscal crisis? Do the differences in the scope and corporate structure between MDBs translate into different disbursement patterns? Beyond their impact to foster development in recipient countries, understanding the behavior of MDB flows is important to assess their contribution to macroeconomic stability. This paper answers these questions studying the co-movement of sovereign lending from MDBs with government expenditure and with private sovereign lending in different fiscal policy stances and during fiscal crises. The paper finds that multilateral sovereign lending is correlated with government expenditure, and that this correlation does not change if the government is running a surplus or a deficit. When considering total MDB lending, this comovement holds even in fiscal crises. Finally, the paper finds evidence of synchronization between multilateral development banks and the International Monetary Fund during fiscal crises. JEL codes: F21, F34, F41, F44, F53

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Joining the club? Procyclicality of private capital inflows in lower income developing economies

Cited by 23 publications

References 30 publications

Sectoral Capital Flows: Covariates, Co-movements, and Controls

Sectoral Capital Flows: Covariates, Co-movements, and Controls

Nexus between Institutional Quality and Capital Inflows at Different Stages of Economic Development

Sovereign External Borrowing and Multilateral Lending: Dynamics and Crises

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