Capital flows: Catalyst or hindrance to economic takeoffs?

Arbeitspapier

This paper applies a probit estimation to assess the relationship between economic takeoffs during 1950- 2000 and inflows of portfolio debt, portfolio equity, and FDI, controlling for country's stock of short-term external debt and commodity terms of trade. Average level of FDI inflows is associated with a 23 percent higher takeoff probability relative to a zero FDI inflow benchmark, and this effect is highest for the Latin America subsample, with a 65 rise in takeoff probability. Higher stock of short term external debt has been associated with a substantial negative effect on the probability of a takeoff, and the effect of the short terms debt overhang is largest for Latin American countries. Yet, virtually all the takeoffs were associated with a rise in portfolio debt inflows. At the sample mean, inflow of portfolio debt is associated with approximately 25 percent higher probability of a takeoff. In contrast, a one standard deviation increase in equity outflows (inflows) is associated with a 47 percent (17 percent) decline in the probability of a takeoff. A one standard deviation improvement in commodity terms of trade is associated with 28 percent higher takeoff probability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 685

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; International Investment; Long-term Capital Movements ; Financial Aspects of Economic Integration ; Economic Growth of Open Economies ; Economic Growth and Aggregate Productivity: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aizenman, Joshua ; Sushko, Vladyslav
• Event: Veröffentlichung
• (who): University of California, Economics Department
• (where): Santa Cruz, CA
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/64543
• Last update: 10.03.2025, 11:41 AM CET