scholarly journals The Impact of Private Capital Flows on Economic Growth in the MENA Region

2020 ◽  
Vol 6 (20) (3) ◽  
pp. 45-67
Author(s):  
Ben-Salha Ousama ◽  
Zmami Mourad
Keyword(s):  
Economic Growth ◽  
Capital Flows ◽  
Growth Rates ◽  
High Growth ◽  
Private Capital ◽  
Mena Region ◽  
Portfolio Flows ◽  
Significant Difference ◽  
Private Capital Flows ◽  
The Impact

The aim of the article is to conduct an empirical analysis of the impact of aggregate and disaggregate private capital flows on economic growth in eleven MENA countries between 1980 and 2018. Unlike prior empirical studies, the fixed effect panel quantile approach developed by Canay (2011) is implemented. Findings suggest that there is a significant difference in the effects of private capital flows on economic growth across lower and higher quantiles. More specifically, the effects of total private capital flows, foreign direct investment flows, portfolio flows and debt flows are positive and statistically significant only for low and medium quantiles, indicating that the enhancing impact of private capital flows in terms of economic growth is only confirmed in countries with relatively low and medium growth rates. Moreover, debt flows affect economic growth in countries recording high growth rates, stressing the importance of financial development in routing those flows into the most productive projects in the economy.

Sovereign credit ratings, relative risk ratings and private capital flows: evidence from emerging and frontier markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Supriyo De ◽  
Sanket Mohapatra ◽  
Dilip Ratha
Keyword(s):  
Relative Risk ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Private Capital ◽  
Content Type ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
Private Capital Flows ◽  
The Impact

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.

Private capital flows and economic growth

2020 ◽  
pp. 73-103
Author(s):  
Elikplimi Komla Agbloyor ◽  
Alfred Yawson ◽  
Pieter Opperman
Keyword(s):  
Economic Growth ◽  
Capital Flows ◽  
Private Capital ◽  
Private Capital Flows

Does Informality Hold the Key to Growth and Stability?

2020 ◽  
Vol 66 (1) ◽  
pp. 29-45
Author(s):  
Meghna Dutta
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Growth Rates ◽  
Informal Economy ◽  
Developing Economies ◽  
High Growth ◽  
Political Stability ◽  
The Impact

This paper attempts to analyse the impact of a prevailing informal sector on the dynamics of growth and inflation in developing economies. The high growth rates posited by most developing economies in the presence of a huge informal sector suggest that this sector might not be the malefactor as often indicated. The main results show that the informal economy not only contributes to economic growth but the firms also help to significantly reduce inflation by generating employment and hence maintain political stability in the economy despite the existence of a huge pool of “surplus labourers”.

scholarly journals Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows

2021 ◽  
pp. 29-63
Author(s):  
Tari M. Karimo
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Capital Flows ◽  
Transition Probability ◽  
Private Capital ◽  
Interest Rate Parity ◽  
Exchange Rate Movement ◽  
Private Capital Flows ◽  
Rate Parity ◽  
The Impact

The study examines the impact of interest rate differential and exchange rate movement on the dynamics of Nigeria’s international private capital flows from 2010Q1 to 2019Q4. It uses the interest rate parity theory and the Markov Switching Time Varying Transition Probability Modelling approach. Findings show that interest rate differential does not explain the dynamics of aggregate capital and Foreign Direct Investment (FDI) flows, but significantly explains Foreign Portfolio Investment (FPI) flows. Also, Movement in real exchange rate is significant in explaining outflows and inflows in FPI, and inflows in FDI, but neutral to aggregate capital flows. The study concludes that deviations from interest rate parity provides opportunities for interest rate and currency arbitrage in Nigeria but using aggregate capital flows mask this evidence. The study therefore recommends that the CBN should focus on exchange rate stabilization policies, so as not only to discourage FPI reversal but to also enhance FDI inflow. This can be done by putting in place foreign reserve accretion measures to boost the ability of the CBN to defend the Naira. The new policy initiative on remittances is a right step in the right direction as it could boost external reserve.

Private capital flows and economic growth in Africa: The role of domestic financial markets

2014 ◽  
Vol 30 ◽  
pp. 137-152 ◽  
Author(s):  
Elikplimi Komla Agbloyor ◽  
Joshua Yindenaba Abor ◽  
Charles Komla Delali Adjasi ◽  
Alfred Yawson
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Capital Flows ◽  
Private Capital ◽  
Private Capital Flows

scholarly journals Private capital flows, stock market and economic growth in developed and developing countries: A comparative analysis

2010 ◽  
Vol 22 (2) ◽  
pp. 107-117 ◽  
Author(s):  
Chee-Keong Choong ◽  
Ahmad Zubaidi Baharumshah ◽  
Zulkornain Yusop ◽  
Muzafar Shah Habibullah
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Comparative Analysis ◽  
Stock Market ◽  
Capital Flows ◽  
Private Capital ◽  
Private Capital Flows

Capital Flows to Developing Countries: Blessing or Curse? (Distinguished Lecture)

1998 ◽  
Vol 37 (4I) ◽  
pp. 125-151 ◽  
Author(s):  
Mohsin S. Khan
Keyword(s):  
Developing Countries ◽  
Capital Flows ◽  
Financial Integration ◽  
Foreign Capital ◽  
Foreign Debt ◽  
Capital Inflows ◽  
Private Capital ◽  
Policy Responses ◽  
Private Capital Flows ◽  
Significant Phenomenon

The surge of private capital flows to developing countries that occurred in the 1990s has been the most significant phenomenon of the decade for these countries. By the middle of the decade many developing countries in Asia and Latin America were awash with private foreign capital. In contrast to earlier periods when the scarcity of foreign capital dominated economic policy-making in these countries, the issue now for governments was how to manage the largescale capital inflows to generate higher rates ofinvestrnent and growth. While a number of developing countries were able to benefit substantially from the private foreign financing that globalisation made available to them, it also became apparent that capital inflows were not a complete blessing and could even turn out to be a curse. Indeed, in some countries capital inflows led to rapid monetary expansion, inflationary pressures, real exchange rate appreciation, fmancial sector difficulties, widening current account deficits, and a rapid build-up of foreign debt. In addition, as the experience of Mexico in 1994 and the Asian crisis of 1997-98 demonstrated, financial integration and globalisation can cut both ways. Private capital flows are volatile and eventually there can be a large reversal of capital because of changes in expected asset returns, investor herding behaviour, and contagion effects. Such reversals can lead to recessions and serious problems for financial systems. This paper examines the characteristics, causes and consequences of capital flows to developing countries in the 1990s. It also highlights the appropriate policy responses for governments facing such inflows, specifically to prevent overheating of the economy, and to limit the vulnerability to reversals of capital flows.

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