Development threshold, capital flows, and financial turbulence

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Main author: Ding, Ding
Other authors: Jinjarak, Yothin
Format: Journal Article           
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id eprints-14269
recordtype eprints
institution SOAS, University of London
collection SOAS Research Online
language English
language_search English
description We study capital flows in a panel of 130 countries, and derive the implications for the observed patterns of capital flows and capital controls before and into the crisis of 2008–11. We find that the size of capital flows is positively correlated with country's income level. In addition, capital flight has a non-linear relationship with the income level. Using the Hansen threshold estimation, we identify a three-stage threshold effect: for low-income countries (GDP per capita below US$ 3,000), capital flight increases as the income level rises; and only after the economy passes a threshold level (GDP per capita above US$ 5,000), capital flight declines with income. We conclude with a case study of Brazil and Korea, observing that the decisions to implement capital control measures tend to be pushed around by the feedbacks among economic growth, currency appreciation, and the global financial conditions.
format Journal Article
author Ding, Ding
author_facet Ding, Ding
Jinjarak, Yothin
authorStr Ding, Ding
author_letter Ding, Ding
author2 Jinjarak, Yothin
author2Str Jinjarak, Yothin
title Development threshold, capital flows, and financial turbulence
publisher Elsevier
publishDate 2012
url https://eprints.soas.ac.uk/14269/

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