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Article
Publication date: 13 March 2020

Biplab Kumar Guru and Inder Sekhar Yadav

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Social implications

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.

Originality/value

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.

Details

Journal of Economic Studies, vol. 47 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 13 May 2021

Supriyo De, Sanket Mohapatra and Dilip Ratha

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Abstract

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Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

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Article
Publication date: 21 July 2020

Olawumi Fadeyi, Stanley McGreal, Michael McCord and Jim Berry

Office markets and particularly international financial centres over the past decade have experienced rapid financialisation, developments and indeed changes in the…

Abstract

Purpose

Office markets and particularly international financial centres over the past decade have experienced rapid financialisation, developments and indeed changes in the post-global financial crisis (GFC) landscape. Importantly, the volume and types of international capital flows have witnessed more foreign actors and vehicles entering into the investment landscape with the concentration of investment intensifying within key financial centres. This paper examines the interaction of international real estate capital flows in the London, New York and Tokyo office markets between 2007 and 2017.

Design/methodology/approach

Using Real Capital Analytics (RCA) data comprising over 5,700 office property transactions equating to $563bn between 2007 and 2017, the direct global capital flows into the London, New York and Tokyo office markets are assessed using an autoregressive distributed lag (ARDL) approach. Further, Granger causality tests are examined to analyse the short-run interaction of international real estate capital flows into these three major office markets.

Findings

By assessing the relativity of internal to external investments in these three central business district (CBD) office markets, differences in market dynamics are highlighted. The London office market is shown to be highly dependent on international flows and the USA, the foremost source of cross-border investment on the global stage. The cointegration and causality analysis indicate that cross-border real estate investment flows in these markets (and financial centres) show both long- and short-run relationships and suggest that the London office market remains more distinct and the most reliant on international capital flows with a wider geographical spread of investment activities and investor types. In the case of New York and Tokyo, these markets appear to be driven by more domestic investment activity and capital seemingly due to subtle factors pertaining to investor home bias, risk aversion and diversification strategies between the markets in the aftermath of the GFC.

Originality/value

Given the importance of the CBD offices in London, New York and Tokyo as an asset class for institutional investors, this paper provides some insights as to their level of connection and the interaction of the international capital flows into these three major cities.

Details

Journal of Property Investment & Finance, vol. 39 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 8 January 2020

Su Zhenyu and Paloma Taltavull

The purpose of this paper is to examine the determinants that affect international capital flows (ICF) toward the Spanish real estate market over the period 1995 first…

Abstract

Purpose

The purpose of this paper is to examine the determinants that affect international capital flows (ICF) toward the Spanish real estate market over the period 1995 first quarter to 2017 fourth quarter.

Design/methodology/approach

VECM methodology is used to analyze time series and panel methods using pooled EGLS regression.

Findings

VECM parameter results for construction and real estate activities sectors, quickly suggesting a stable performance of capital flows toward Spanish real estate sector that the short-term fluctuation of foreign investment results contributes to the long-term equilibrium relatively soon. By applying the Monetary theory of Johnson, the model identifies a relevant role of M3 explaining capital flows to real estate, together with the lagged variables of construction and real estate activities capital flows, Spanish real interest rate and Spain’s economic growth rate; they are the significant determinants on capital movement to Spanish real estate sector. Interestingly, Spanish housing prices as an exogenous variable, directly, significantly and negatively affect real estate capital flows in all cases as a way to capture the assets price bubble.

Practical implications

Findings highlight reasons affecting capital flows to real estate and construction activities to Spanish sectors which allow capital Funds to take into account those drivers in their investment decisions.

Originality/value

This paper is the first attempt to analyze the determinants of ICF to Spanish real estate market; it has a significant meaning for both Spanish economy and international investors.

Details

Journal of Property Investment & Finance, vol. 38 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 8 June 2012

Wei Li and Zhichao Zhang

The purpose of this paper is to explore in depth the impact and transmission mechanism of different international capital flows on domestic employment and wages in China…

Abstract

Purpose

The purpose of this paper is to explore in depth the impact and transmission mechanism of different international capital flows on domestic employment and wages in China within a systematic framework; also to reveal whether the empirical results can confirm the basic model inferences.

Design/methodology/approach

Using dynamic economic model and empirical experiment, this study designs and conducts the analysis within a systematic framework. The authors acquire the needed and credible empirical data.

Findings

The international capital inflows will increase the average wage level, and the international capital outflows will significantly reduce the level of domestic wages. The unofficially recorded capital flows would appear negatively related to the domestic wages. Due to the complexities of relevant elements, the impact of different international capital flows on domestic employment is of insignificance. It is noteworthy that the impact of international capital flows on the average wage changes of different provinces will tend to converge to a certain extent.

Practical implications

The results have reflected that the capital flows between the different provinces have no obvious frictions and barriers.

Originality/value

The paper explores in depth the impact and transmission mechanism of different international capital flows on domestic employment and wages within a systematic framework. The empirical analysis related to the China different provinces is an exploratory experiment.

Details

China Finance Review International, vol. 2 no. 3
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 5 December 2016

Eric Osei-Assibey and Seth Obeng Adu

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.

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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.

Details

African Journal of Economic and Management Studies, vol. 7 no. 4
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 6 November 2017

Levan Efremidze, Sungsoo Kim, Ozan Sula and Thomas D. Willett

This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.

Abstract

Purpose

This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.

Design/methodology/approach

Emphasizing the importance of looking at the behavior of domestic as well as foreign capital flows, the authors distinguish sudden stops from capital flow reversals by attributing the former to foreign capital flows only.

Findings

It is found that, despite the large differences in the number of surges identified by several different measures in the literature, a majority of surges do end in reversals of some type. The percentages tend to be slightly over half for surges in net capital flows, but on average, 70 per cent of gross surges end in sudden stops. Furthermore, contrary to popular belief, approximately half of sudden stops and net capital flow reversals are not preceded by surges. It is also found that surges that persist longer are more likely to turn into sudden stops and reversals.

Research limitations/implications

The authors find substantial empirical differences in the characteristics of sudden stops (based on gross foreign flows) and reversals (based on net flows).

Practical implications

Large inflows of financial capital are not always a strong indicator that a country’s economic policies will continue to provide stability in the future. They may signal an increase rather than reduction in the risk of future instability.

Originality/value

This study focuses on an issue that has been less explored to date, the relationship between capital flow surges, reversals and sudden stops. The authors distinguish, redefine and document differences among capital flow reversals and sudden stops. Duration of surges is related to the likelihood of having reversals and sudden stops.

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Article
Publication date: 1 April 2003

Georgios I. Zekos

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination…

Abstract

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

Details

Managerial Law, vol. 45 no. 1/2
Type: Research Article
ISSN: 0309-0558

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Article
Publication date: 26 October 2010

Graeme Newell, Alastair Adair and Stanley McGreal

The purpose of this paper is to assess the robustness of capital flows into European commercial property markets during the global financial crisis (GFC) – over 2007‐2008;…

Abstract

Purpose

The purpose of this paper is to assess the robustness of capital flows into European commercial property markets during the global financial crisis (GFC) – over 2007‐2008; particularly highlighting differences between the developed and developing European markets.

Design/methodology/approach

Using the Real Capital Analytics database of over 49,000 commercial property transactions valued at over $1.5 trillion in 2007‐2008, the robustness of capital flows into the European commercial property markets is assessed during the GFC. The impact of the GFC on capital flows is assessed in both a regional context and global context, as well as between the developed and developing markets in Europe.

Findings

This paper assesses the robustness of the capital flows into the commercial property markets in Europe over 2007‐2008. Clear differences emerge regarding the relative impact in Europe in a regional and global context, as well as between the developed and developing European markets. The results highlight the robustness, stature and significant relative contribution of capital flows into the European commercial property markets across a range of property investment characteristics during the GFC.

Practical implications

Given the importance of commercial property as an asset class for institutional investors, this paper assesses the robustness of capital flows into the commercial property markets in Europe. By embedding this in a regional and global context, the robustness, stature, relative impact and significant contribution by European commercial property markets in the uncertainty and volatility of the environment of the global financial crisis is articulated for global property investors. Clear differences between the developed and developing markets in Europe are identified.

Originality/value

Using over 49,000 commercial property transactions, this paper is the first attempt to rigorously and empirically assess the robustness of capital flows into global commercial property markets, with a specific focus on the European commercial property markets during this unique international event of the GFC. Given the significance of commercial property as an institutional asset class, this empirically validated research enables a more informed and critical understanding of the impact of the GFC on capital flows into the commercial property markets in Europe, as well as identifying global property investor considerations regarding the ongoing significance for capital flows in their commercial property investment strategies in Europe and globally.

Details

Journal of European Real Estate Research, vol. 3 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

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