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In the past few decades, there have been phenomenal increases in capital flows to developing and emerging markets. However, a key question that has largely remained unanswered is whether the expected economic benefits have materialized. Existing studies have concentrated on the impact of capital flows on domestic investment in developing countries, emerging markets, transition economies, ECOWAS and sub-Saharan Africa, leaving an important economic bloc, OPEC. This paper aims to assess the impact of capital flows on domestic investment in OPEC countries – with a view to determining whether capital flows crowd in or crowd out domestic investment.

For the empirical analysis, the authors used the autoregressive distributed lag (ARDL) technique.

The empirical results provide evidence that capital flows crowd out domestic investment in all the OPEC countries considered, except for Angola and Kuwait. The authors further extended the analysis to disaggregated capital flows (FDI, portfolio investment). Evidence from the different capital flows components revealed that, for most countries, the different capital flows components also crowd out domestic investment.

To the best of the author’s knowledge, no study has empirically addressed the effect of capital flows on domestic investment in OPEC countries. This study, therefore, constitutes an interesting empirical contribution and a novel idea in the literature.

This study aims to examine the effect of various forms of capital flows on financial stability in middle-income countries from 2010 to 2017 using the World Bank economy classifications of 121 economies.

Panel spatial correlation consistent approach was used in this study.

The findings provide convincing evidence that in middle-income countries, capital flows are positive and significant predictors of financial stability and that financial systems in advanced economies are more stable than those of emerging and developing countries. However, outward foreign direct investments are shown to have the largest potential for ensuring financial stability.

Globalization has fostered financial integration of nations, which is manifested in capital flows from lower-income countries to middle-income and upper-income countries and vice versa. These flows can lead to financial instability if not properly controlled. The authors show how the various forms of capital flows affect the financial stability in middle-income countries.

This study empirically examines the effect of capital controls on the volume and composition of capital flows at aggregated as well as at disaggregated level by different asset classes such as debt, FDI, equity, and derivatives.

Several dynamic panel SYS-GMM models are employed on two sets of unique data on cross-border capital flows and capital control index along with control variables at aggregated and disaggregated level by different asset classes during 1995–2015 for a sample of 31 Asian economies.

Econometric findings suggest that higher capital controls effectively reduce gross capital flows. The reduction in gross capital flows is largely found to be on account of effectiveness of controls on equity flows. However, the impact of controls on overall debt and derivative flows is found to be insignificant. Further, it was found that an increase in direct capital controls disaggregated by inflow and outflow categories significantly reduced the inflow of debt and equity + FDI flows and outflow of equity + FDI and derivative flows. Finally, the study did not find any substitution effect (due to indirect controls) and net effect on capital flows.

Results of such empirical examination may enable governments in respective countries to pursue prudent and rational capital controls as a shield against capital flight and shock transmission.

Preventing capital flight through effective controls has macroeconomic benefits such as maintaining stability in income, growth, interest rate, exchange rate, and employment levels for the society.

The primary contribution of the study is the analysis of effectiveness of capital controls disaggregated by different asset categories such as debt, equity, FDI, and derivatives using two unique recent data sets for a large sample of Asian economies.

Relative risk ratings measure the degree by which a country’s sovereign rating is better or worse than other countries (Basu et al., 2013). However, the literature on the impacts of sovereign ratings on capital flows has not covered the role of relative risk ratings. This paper aims to examine the effect of relative risk ratings on private capital flows to emerging and frontier market economies is filled. In the analysis, the effect of relative risk ratings to that of absolute sovereign ratings in influencing private capital flows are compared.

This paper examines the influence of sovereign credit ratings and relative risk ratings on private capital flows to 26 emerging and frontier market economies using quarterly data for a 20-year period between 1998 and 2017. A dynamic panel regression model is used to estimate the relationship between ratings and capital flows after controlling for other factors that can influence capital flows such as growth and interest rate differentials and global risk conditions.

The analysis finds that while absolute sovereign credit ratings were an important determinant of net capital inflows prior to the global financial crisis in 2008, the influence of relative risk ratings increased in the post-crisis period. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. The main results are robust to an alternate measure of capital flows (gross capital flows instead of net capital flows), to the use of fixed gross domestic product weights in calculating relative risk ratings and to the potential endogeneity of absolute and relative ratings.

This study advances the literature on being the first attempt to understand the impact of relative risk ratings on capital flows and also comparing the impact of absolute sovereign ratings and relative risk ratings on capital flows in the pre- and post-global financial crisis periods. The findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings.

The aim of the study is to investigate the relative significance of the determinants of disaggregated capital flows (foreign direct investment and portfolio flows) to five developing countries, across different time horizons.

An empirically tractable structural VAR model of the determinants of capital flows is developed, and variance decomposition and impulse response analyses are used to investigate the temporal dynamic effects of shocks to push and pull factors on foreign direct investment and portfolio flows.

Estimation of the model using quarterly data for the period 1976‐2001 provides evidence supporting the hypothesis that shocks to real variables of economic activity such as foreign output and domestic productivity are the most important forces explaining the variations in capital flows to developing countries.

These findings highlight the concomitant need for policy makers in developing countries to design domestic policy that accounts for both external and internal shocks to real variables of economic activity.

Previous empirical studies on the determinants of capital flows to developing countries have mostly examined the capital flow variable in aggregate, and have largely overlooked the possibility that the relative significance of estimated coefficients of such determinants may vary across time horizons.

The purpose of this paper is to investigate the determinants of portfolio equity flows to the Sub-Saharan African (SSA) region over the period 1996-2010.

The study uses a sample of 14 SSA countries to estimate the baseline regression through employing the system generalized methods of moment dynamic panel estimation framework. To check the robustness of the estimation results, the study further analyses the data set using the random effects-generalized least squares (EGLS) estimator. The Random effects-generalized least squares estimator is also referred to a the Estimated Generalized least Squares (EGLS) estimator.

The paper finds a significant positive relationship between financial development and portfolio equity flows. Furthermore, while the study surprisingly finds trade openness to have a significant negative relationship, political stability is found to have a significant positive relationship with portfolio equity. To check for the robustness of these results, the authors further analyse the data set using the random EGLS estimator. The result of the EGLS estimator confirms that there is a robust positive relationship between financial development and portfolio equity flows to SSA. However, the results suggest that neither trade openness nor political stability is a robust determinant of portfolio equity flows to the sub-region.

Policy measures should aim at enhancing financial sector development, political stability and rule of law. A transparent judicial system that enhances rule of law and deepens democratic governance in countries in the sub-region is critical, but even more critical is deepening the financial sector, given the important role financial development plays in portfolio equity flows as suggested by the findings. A range of measures and appropriate policy responses are therefore needed for countries that have to manage macroeconomic and financial stability risks to deepen the financial sector.

Most studies on private capital flows to SSA have focussed on foreign direct investment flows with no or scanty evidence on the drivers of portfolio equity flows. This study fills this gap in the literature.

This paper examines the effectiveness of the three macro-prudential measures introduced by the Korean government in 2010 and 2011: (i) introduction of limit for FX forward positions of domestic banks and foreign bank branches, (ii) reintroduction of tax on foreign investors' earnings from Korean government bonds, and (iii) imposition of macro-prudential stability levy on non-deposit foreign currency liabilities appeared in bank balance sheets. The results show that the three measures were not successful: The limits of FX forward position did not lead to the decrease in foreign borrowings. The reintroduction of the tax did not reduce foreign investments in Korean government bonds. Lastly, the levy on non-deposit foreign currency liabilities did not lower the foreign borrowings from the banks and did not result in more financing through deposits for banks. The ineffectiveness of the capital flow management system in controling the amount of foreign capital flows implies that the system might not be effective in mitigating the pressure on exchange rate caused by excessive volatility of foreign capital flows.

This paper aims to discuss the main characteristics of the Middle East North Africa (MENA) region's capital inflows volatility. It also examines the effect of institutional quality and information availability on capital inflows volatility in selected MENA countries (Bahrain, Egypt, Israel, Jordan, Kuwait, Libya, Morocco, Oman, Saudi Arabia and Tunisia) in the period 1996–2017.

The study's assessments are based on the International Country Risk Guide (ICRG) and globalization indices. It also employs an updated data set of balance of payments indicators released by the International Monetary Fund. Moreover, the study uses econometric panel modeling of random effect model, with Driscoll-Kraay robust standard error, to analyze the relationship between capital inflows volatility, institutional quality and information availability.

The paper finds that both institutional quality and information availability are in an inverse relationship with the total capital inflows volatility in the MENA region. However, the findings vary across the different components of total capital inflows. For example, the volatility of foreign direct investment (FDI) declines, like total capital flows, as the two factors improve. However, the volatility of foreign portfolio investment (FPI) is negatively related to institutional quality but does not have any significant relationship with information availability. While the volatility of foreign other investments (FOI) decreases with the availability of information, but does not have any significant relationship with institutional quality.

This paper expands the limited literature regarding the determinants of capital inflows volatility. Furthermore, it is the first study that investigates the effect of institutional quality and information availability on capital inflows volatility in the MENA region.

The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence, and the mobility and movement of capital.

This paper surveys the theoretical and empirical literature on monetary interdependence and financial globalization. The major ways in which these concepts are measured empirically are presented and critiqued.

Disagreements about the degree of financial integration and capital mobility are, in part, explained by the different approaches to measuring these concepts. One major challenge in obtaining a good measures is controlling for other major factors that may influence observed correlations among financial variables. While these relationships still cannot be estimated precisely, it can be safely said that while high for many countries, few if any financial markets are perfectly integrated across countries.

By offering a comprehensive analysis of these different measurements, the paper underscores the different implications for national policies and the operation of the international monetary system of different dimensions of globalization. In particular, the proposition that financial globalization has left most countries with little autonomy for domestic monetary policy is subject to serious debate, at least in the short run.