Globalisation and Governance: Thresholds for the Impacts of the Main Determinants of Capital Inflows

2019-09-07
Taşdemir, Fatma
Özmen, Erdal
This paper investigates whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated threshold levels for structural domestic conditions (SDC) represented by governance/institutional quality, trade openness, de facto international financial integration and de jure financial openness in emerging market and developing economies. Our results strongly suggest that, for all the components of capital inflows, the impact of the domestic pull factor is substantially much higher for the episodes of better governance, higher trade and de jure financial openness and de facto international financial integration. The sensitivity of non-FDI and aggregate inflows to GFC is highly significant and tends to be considerably higher for countries with better SDC. FDI inflows are found to be basically determined by the domestic pull factor across all these regimes. The impact of GFC on FDI inflows appears not to considerably change across the SDC.
Citation Formats
F. Taşdemir and E. Özmen, Globalisation and Governance: Thresholds for the Impacts of the Main Determinants of Capital Inflows. 2019.