Fueling or Following Growth? Causal Effects of Capital Inflows on Recipient Economies

January 19, 2024

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Format: Chicago

Nicolas End. Fueling or Following Growth? Causal Effects of Capital Inflows on Recipient Economies, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Identifying the causal impact of capital inflows on growth and development has been a perennial challenge. This paper proposes a new way to investigate the effect of capital flows on recipient emerging and developing economies, using shift-share instruments and correcting for indirect flows. It finds a significantly beneficial effect of loan and bond inflows on economic performance, which materializes after a few years. It also finds some confirmation that the absorptive capacity of recipient economies depends on their fundamentals.

Subject: Balance of payments, Capital flows, Capital inflows, Foreign direct investment, Institutional View on capital flows, Portfolio investment

Keywords: Bond portfolio inflow, Capital flows, Capital inflows, Economic growth, Equity portfolio inflow, Foreign direct investment, Global, Inflow effect, Institutional View on capital flows, Investment inflow, Portfolio investment, Recipient emerging economy, Shift-share instrument

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/015
Stock No:

WPIEA2024015
ISBN:

9798400265426
ISSN:

1018-5941

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