QEH Working Paper Number 52 Econometrics of the Real Effects of Cross-Border Capital Flows in Emerging Markets

This study examines the effects of cross-border flows – FDI, FPI, and FBL – on growth and savings rates using data on 56 countries from 1969 through 1998. Very generally, few flow measures are significant determinants of real variables. However, consideration of the initial level of financial depth – including measures of private credit, bank lending, and stock market development – seems to produce more significant results, as some data indicate that flows have a more deleterious (benevolent) effect in countries with lower (higher) levels of development. Moreover, extreme bound analysis (EBA) of significant results indicates that these findings are robust.