Growing Up with Capital Flows

By A. Mody, A. Murshid. Social Science Research Network, 2002

408 citations recorded by the source corpus.

We examine the capital flows-domestic investment relationship for 60 developing countries from 1979 to 1999. In the 1990s, even as liberalization attracted new flows, foreign capital stimulated less domestic investment than in the preceding decade. With greater financial integration, governments accumulated more international reserves and domestic residents diversified by investing abroad. Foreign investors were also motivated by diversification objectives rather than by unmet investment needs. Inflows were channeled increasingly through portfolio flows - or through foreign direct investment with the characteristics of portfolio capital - resulting in weak investment stimulus. However, stronger policy environments strengthened the link between inflows and investment.

Subfields: Economics and Econometrics, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/ddd01fff6a752455e6dec42cb4fbe9a9caf37561

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Citations in the corpus

Measuring Financial Integration: A New Data Set (2009, background): “Mody and Murshid (2002) extend these dummies into the years after 1995, thus covering the years 1966–2000 and 184 countries.”
Effects of Financial Globalization on Developing Countries: Some Empirical Evidence (2003, methodology): “The earlier data were extended through 1998 by Mody and Murshid (2002).”
The impact of capital flows on domestic investment in transition economies (2008, methodology): “Bosworth and Collins (1999) obtain a coefficient of 0.81 for the contemporaneous effect of FDI on investment and Mody and Murshid (2005) report a similar coefficient of 0.72.”
Foreign direct investments, institutional quality, and economic growth (2019, background): “While studies like Mody and Murshid (2005) have shown that FDI has a crowding out effect in the short run, others have argued that better institutional quality would encourage foreign investors to invest into industries with the lesser density of domestic firms.”
Controlling Capital? Legal Restrictions and the Asset Composition of International Financial Flows (2009, background): “Mody and Murshid (2005) consider the link between capital controls and domestic investment.”
FDI Inflow Determinants in BRIC countries: A Panel Data Analysis (2011, background): “Keywords: Foreign Direct Investment, BRIC, Panel Data, Macroeconomic factors”
Financial Globalization and Economic Policies (2009, positive): “Finer measures of openness based on the AREAER have been developed by Quinn (1997, 2003), Miniane (2004), Chinn and Ito (2005), Mody and Murshid (2005) and Edwards (2005).”
Institutional Quality and Economic Growth: The Case of Emerging Economies (2018, background): “In addition, FDI also complements to domestic investment by relaxing the liquidity constraint, therefore, escalating economic growth [26].”