Download or read book Global Capital Flows and Financing Constraints written by Ann E. Harrison and published by World Bank Publications. This book was released on 2002 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease host-country firms' financing constraints. However, if incoming foreign investors borrow heavily from domestic basnks, direct foreign investment (DFI) may exacerbate financing constraints by crowding host country firms out of domestic capital markets. Combininb a unique cross-country firm-level panel with time-series data on restrictions on international transactions and capital flows, we find that different measures of global flows are associated with a reduction in firm-level financing constraints. First, we show that one type of capital inflow--DFI--is associated with a reduction in financing constraints. Second, we test whether restrictions on international transactions affect firms' financing constraints. Our results suggest that only one type of restriction--those on capital account transactions--negatively affect firms' financing constraints. We also show that multinational firms are not financially constrained and do not appear to be sensitive to the level of DFI. This implies that DFI eases financing constraints for non-multinational firms. Finally, we show that DFI only eases financing constraints in the non-G7 countries.

Download or read book Global Capital Flows and Financing Constraints written by Ann E. Harrison and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease the financing constraints of host country firms. But if incoming foreign investors borrow heavily from domestic banks, foreign direct investment may exacerbate financing constraints by crowding host country firms out of domestic capital markets. Combining a unique cross-country firm-level panel with time-series data on restrictions on international transactions and capital flows, Harrison, Love, and McMillan find that different measures of global flows are associated with a reduction in firm-level financing constraints. First, the authors show that one type of capital inflow-foreign direct investment-is associated with a reduction in financing constraints. Second, they test whether restrictions on international transactions affects the financing constraints of firms. The results suggest that only one type of restriction-those on capital account transactions-negatively affects firms' financing constraints. The authors also show that multinational firms are not financially constrained and do not appear to be sensitive to the level of foreign direct investment. This implies that foreign direct investment eases financing constraints for non-multinational firms. Finally, the authors show that (1) foreign direct investment only eases financing constraints in the non-G7 countries, and (2) other kinds of flows, such as portfolio investment, have no impact on financing constraints.

Download or read book Managing Capital Outflows Further Operational Considerations written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2015-07-12 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Guidance Note for the Liberalization and Management of Capital Flows (IMF 2013a) provides operational guidance to staff on the use of the Fund’s institutional view on the liberalization and management of capital flows (Box 1). It discusses appropriate policies with respect to the liberalization of capital flows and the management of disruptive capital inflows and outflows. With respect to capital outflows, the institutional view considers that capital flow management measures (CFMs) may be appropriate in crisis-type circumstances or, in the context of capital flow liberalization, if countries find that they have liberalized prematurely and are unable to handle the resulting capital flows. In non-crisis-type circumstances, the guidance considers outflows as being appropriately handled by macroeconomic, financial, and structural policies. It is intended to mirror the policy advice with respect to capital inflows. The guidance is, however, relatively brief and would benefit from some elaboration to lay out the possible configurations of policies in the context of the institutional view. This note seeks to provide such an elaboration, which is particularly relevant as capital outflows are becoming a more relevant policy challenge.

Download or read book Managing Capital Flows and Exchange Rates written by Reuven Glick and published by Cambridge University Press. This book was released on 2011-03-03 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging economies have been the beneficiaries of sharply increased volumes of international capital inflows in the past decade. These inflows have eased foreign financing constraints and offered the potential for higher investment and growth. At the same time, they have posed challenges for policy makers by threatening to fuel inflation, adversely affect international competitiveness, and undermine domestic banking stability. The essays in this volume provide a timely and useful comparison of the experiences of emerging Pacific Basin countries in both Asia and Latin America.

Download or read book International Capital Flows written by Martin Feldstein and published by University of Chicago Press. This book was released on 2007-12-01 with total page 500 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Download or read book International Capital Flows and Development written by Mr.Thierry Tressel and published by International Monetary Fund. This book was released on 2010-10-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does capital flow from rich to poor countries? We revisit the Lucas paradox and explore the role of capital account restrictions in shaping capital flows at various stages of economic development. We find that, when accounting for the degree of capital account openness, the prediction of the neoclassical theory is confirmed: less developed countries tend to experience net capital inflows and more developed countries tend to experience net capital outflows, conditional of various countries’ characteristics. The findings are driven by foreign direct investment, portfolio equity investment, and to some extent by loans to the private sector.

Download or read book Disaggregated Perspectives on Emerging Market Financial Flows and Integration written by Lei Ye and published by . This book was released on 2015 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation addresses questions relating to the real economic impact of international financial flows and integration on emerging market economies. Chapter 1 studies emerging markets' corporate liquidity policies in response to financial constraints and uncertainty in global capital markets. I develop a simple model that shows the importance of these two factors in motivating emerging market firms to accumulate internal funds in the form of cash. Using firm and issuance-level data, I find evidence consistent with this hypothesis. I consider the context of these economies' widespread capital flow booms and busts surrounding the global financial crisis of 2008-09. More constrained firms held more cash on average, but they had weaker ability to accumulate cash during the post-crisis period. Furthermore, I show that cash improved foreign-financing-constrained firms' resilience, as those that held more cash prior to the crisis maintained higher levels of investment after the crisis started. Lastly, firms in countries with higher capital flows volatility during the postcrisis period accumulated more cash. This paper highlights a previously-ignored dimension in international economic policy: corporate internal funds impact the vulnerability of firms to capital-flows-generated supply shocks. Chapter 2 investigates the effects of capital account liberalization on wage inequality in emerging markets. I first develop a two-country general equilibrium model, which predicts that wages would rise across all sectors after an emerging market liberalizes its capital account. However, due to sector-level differences in marginal labor productivity, wages increase more in the sector with higher skill intensity. I then use industry-level panel data across sixty-eight emerging markets to evaluate this model. Consistent with the predictions of the model, financial liberalization boosts real wages across all sectors but this increase is disproportionately higher for more skill-intensive sectors, suggesting a rise in wage inequality. Chapter 3 examines the effects of surges and stops in gross capital inflows on emerging market corporate investment at the firm level. While surges and stops do transmit to the real economy in the form of higher and lower physical investment, respectively, this effect is not symmetric. The increase in investment during surge periods is larger in magnitude than the decrease in investment posed by stop episodes. The investment decline during stop episodes is concentrated among financially constrained firms. No such concentrated effect was observed during surge periods. Financial openness affects the magnitude of investment declines during stop episodes but plays no additional role in affecting financially constrained firms, suggesting that the source of emerging market firm financial constraints arises from micro-structural factors. ii.

Download or read book Regional and Global Capital Flows written by Takatoshi Ito and published by University of Chicago Press. This book was released on 2009-02-15 with total page 404 pages. Available in PDF, EPUB and Kindle. Book excerpt: The volume of capital flows between industrial and developing countries has grown dramatically in the past decade and has become a major issue in a world that is increasingly "globalized." Here Takatoshi Ito and Anne O. Krueger, two leading experts on this topic, have assembled a group of scholars who address different types of capital flows—bank lending, bonds, direct foreign investment—and the implications they hold for economic performance. With its particular focus on the Asian financial crises, this work presents a new model for policy makers everywhere in thinking about the role of private capital flows.

Download or read book Capital Flow Deflection written by Paolo Giordani and published by International Monetary Fund. This book was released on 2014-08-08 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on the coordination problem among borrowing countries imposing controls on capital infl ows. In a simple model of capital flows and controls, we show that inflow restrictions distort international capital flows to other countries and that, in turn, such capital flow deflection may lead to a policy response. We then test the theory using data on inflow restrictions and gross capital inflows for a large sample of developing countries between 1995 and 2009. Our estimation yields strong evidence that capital controls deflect capital flows to other borrowing countries with similar economic characteristics. Notwithstanding these strong cross-border spillover effects, we do not find evidence of a policy response.

Download or read book The Drivers of Capital Flows in Emerging Markets Post Global Financial Crisis written by Swarnali Ahmed Hannan and published by International Monetary Fund. This book was released on 2017-03-13 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of 34 emerging markets and developing economies over the period 2009Q3-2015Q4, the paper employs a panel framework to study the determinants of capital flows, both net and gross, across a wide range of instruments. The baseline regressions are then extended to focus on high and low episodes – quarters with flows one standard deviation above/below mean. Overall, the results suggest that the capital flow slowdown witnessed in recent years is due to a combination of lower growth prospects of recipient countries and worse global risk sentiment. However, the determinants of flows can be considerably different across instruments and across the type of flows considered, net or gross. The sensitivity of certain types of flows, towards push and pull factors, increases during periods of high and low capital flows. Moreover, some variables may not necessarily be significant during normal times, but can be important drivers during such episodes, and vice versa. Indicators like the gap between the U.S. long- and short-term maturity bond yields – not significant during normal times – can be an important driver during high episodes.

Download or read book The Composition of International Capital Flows written by Rui A. Albuquerque and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Evidence on international capital flows suggests that foreign direct investment (FDI) is less volatile than other financial flows. To explain this finding, I model international capital flows under the assumptions of imperfect enforcement of financial contracts and inalienability of FDI. Imperfect enforcement of contracts leads to endogenous financing constraints and the pricing of default risk. Inalienability implies that it is not as advantageous to expropriate FDI relative to other flows. These features combine to give a risk sharing advantage to FDI over other capital flows. This risk sharing advantage of FDI translates into a lower default premium and lower sensitivity to changes in a country's financing constraint. The model offers the new implication that financially constrained countries should borrow relatively more through FDI. This is because FDI is harder to expropriate and not because FDI is more productive or less volatile. Using several creditworthiness and country risk ratings to measure financing constraints, I present new evidence linking FDI and financing constraints. Moreover, numerical simulations of the model generate stronger serial correlation for FDI than for other flows into developing countries. This corroborates the view that non-FDI flows are more short-term and more likely to change direction.

Download or read book Global Capital Flows written by Stephany Griffith-Jones and published by Springer. This book was released on 1998-11-12 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book examines the rapid growth and dramatic changes in capital flows globally and to emerging markets. In the context of relevant economic theory, it analyses benefits and costs of large and volatile capital flows to developing countries; the latter includes damaging currency crises as the Mexican and East Asian economies. The book makes innovative proposals on how best national governments - and especially - international organisations can avoid such crises.

Download or read book Financial Development and Financing Constraints written by Inessa Love and published by . This book was released on 2001 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Microeconomic evidence from 40 countries shows that financial development aids growth by reducing financing constraints that would otherwise restrict efficient firm investment.

Download or read book Capital Controls and the Cost of Debt written by Eugenia Andreasen and published by International Monetary Fund. This book was released on 2017-06-09 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a panel data set for international corporate bonds and capital account restrictions in advanced and emerging economies, we show that restrictions on capital inflows produce a substantial and economically meaningful increase in corporate bond spreads. A number of heterogeneities suggest that the effect of capital controls on inflows is particularly strong for more financially constrained firms, establishing a novel channel through which capital controls affect economic outcomes. By contrast, we do not find a robust significant effect of restrictions on outflows.

Download or read book Growth and Capital Flows with Risky Entrepreneurship written by Mr.Damiano Sandri and published by International Monetary Fund. This book was released on 2010-02-01 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs to rely on self-financing, so that when business opportunities open up entrepreneurs increase saving to finance the investment that produces growth. The key insight is that saving has to rise more than investment to allow also for the accumulation of precautionary assets. Plausibly calibrated simulations show that this net saving increase can sustain large and persistent net capital outflows.

Download or read book Capital Flows are Fickle written by Mr.John C Bluedorn and published by International Monetary Fund. This book was released on 2013-08-23 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt.

Download or read book Managing Elevated Risk written by Iwan J. Azis and published by Springer. This book was released on 2014-12-11 with total page 129 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book discusses the risks and opportunities that arise in Emerging Asia given the context of a new environment in global liquidity and capital flows. It elaborates on the need to ensure financial and overall economic stability in the region through improved financial regulation and other policy measures to minimize the emergent risks. "Managing Elevated Risk: Global Liquidity, Capital Flows, and Macroprudential Policy—An Asian Perspective" also explores the range of policy options that may be deployed to address the impact of global liquidity on domestic financial and socio-economic conditions including income inequality. The book is primarily aimed at policy makers, financial market regulators and supervisory agencies to help them improve national regulatory systems and to promote harmonization of national regulations and practices in line with global standards. Scholars and researchers will also gain important information and knowledge about the overall impacts of changing global liquidity from the book.