Growth from International Capital Flows: The Role of Volatility Regimes

42 Pages Posted: 2 May 2011

See all articles by Ashoka Mody

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Antu Panini Murshid

University of Wisconsin - Milwaukee - Department of Economics

Date Written: April 2011

Abstract

Recent commentary has downplayed the growth dividend from international financial integration, highlighting the possibly negative correlation between capital inflows and long-run growth. This paper presents new evidence consistent with standard economic theory and a more benign interpretation of cross-border private capital flows. The key observation is that a country’s growth volatility changes over time. With volatility below a threshold, an inflow of foreign capital has promoted growth. However, during periods of volatile growth, more flows have been associated with slower growth. Volatility levels and changes reflect an interaction of domestic production and institutional structures with global factors.

Keywords: Capital flows, Capital inflows, Current account surpluses, Developing countries, Development assistance, Economic growth, Economic models, Foreign investment

Suggested Citation

Mody, Ashoka and Murshid, Antu Panini, Growth from International Capital Flows: The Role of Volatility Regimes (April 2011). IMF Working Paper No. 11/90, Available at SSRN: https://ssrn.com/abstract=1826543

Ashoka Mody (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

Antu Panini Murshid

University of Wisconsin - Milwaukee - Department of Economics ( email )

210 N. Maryland Avenue
Bolton Hall, 856
Milwaukee, WI 53211
United States
414-229-4402 (Phone)
414-229-3860 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
139
Abstract Views
800
Rank
374,934
PlumX Metrics