nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2007‒06‒02
one paper chosen by
Iulia Igescu
Global Insight, GmbH

  1. Short -Term Capital Flows and Growth in Developed and Emerging Markets By Pavlos Petroulas

  1. By: Pavlos Petroulas (Bank of Greece)
    Abstract: A lot of attention has been directed towards recent financial crises around the world. Empirical studies have found that short-term flows increase financial fragility and increase also the probability of financial crises. This study takes a macro-oriented approach and shows that while large and volatile short-term flows have no effect on growth for rich countries, they are growth inhibiting for emerging markets. These results are robust to a large variety of estimation methods and pass stringent extreme bound analysis criteria. Moreover, their magnitude turns out to be of economic importance. The analysis indicates that opening up emerging markets' capital accounts, which implies increased short-term capital flows, is not a clear-cut way to prosperity.
    Keywords: Capital flows; Growth; Financial crises; Panel data
    JEL: F32 F43 F34 C23
    Date: 2007–04

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