Publication:
The Effect of Capital Flows Composition on Output Volatility

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dc.contributor.authorFederico, Pablo
dc.contributor.authorVegh, Carlos A.
dc.contributor.authorVuletin, Guillermo
dc.contributor.authorVuletin, Guillermo
dc.date.accessioned2013-04-12T17:16:01Z
dc.date.available2013-04-12T17:16:01Z
dc.date.issued2013-03
dc.description.abstractA large literature has argued that different types of capital flows have different consequences for macroeconomic stability. By distinguishing between foreign direct investment and portfolio and other investments, this paper studies the effects of the composition of capital inflows on output volatility. The paper develops a simple empirical model which, under certain conditions that hold in the data, yields three key testable implications. First, output volatility should depend positively on the volatilities of both foreign direct investment and portfolio and other inflows. Second, output volatility should be an increasing function of the correlation between both kinds of inflows. Third, output volatility should be a decreasing function of the share of foreign direct investment in total capital inflows, for low values of that share. The data provide strong support for all three implications, even after controlling for other factors that may influence output volatility, and after dealing with potential endogeneity problems. These findings call attention to the importance of taking into account the synchronization and composition of capital flows for output stabilization purposes, as opposed to just focusing on the volatility of each component of capital flows.en
dc.identifierhttp://documents.worldbank.org/curated/en/2013/03/17458211/effect-capital-flows-composition-output-volatility
dc.identifier.urihttps://hdl.handle.net/10986/13184
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 6386
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADVANCED ECONOMIES
dc.subjectAFFILIATED ORGANIZATIONS
dc.subjectAMERICAN DEVELOPMENT BANK
dc.subjectBENCHMARK
dc.subjectBOND
dc.subjectBUDGET CONSTRAINTS
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL CONTROLS
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL STOCK
dc.subjectCOMMODITY
dc.subjectCOMMODITY PRICES
dc.subjectCOST OF CAPITAL
dc.subjectCOUNTRY RISK
dc.subjectCURRENCY
dc.subjectDATA AVAILABILITY
dc.subjectDEBT
dc.subjectDERIVATIVE
dc.subjectDERIVATIVES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPING COUNTRY
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDEVELOPMENT POLICY
dc.subjectDISCOUNTED VALUE
dc.subjectDIVIDENDS
dc.subjectDOMESTIC SAVING
dc.subjectDUMMY VARIABLE
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC INSTABILITY
dc.subjectECONOMIC OUTLOOK
dc.subjectECONOMIC RESEARCH
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKETS
dc.subjectEMPIRICAL GROWTH LITERATURE
dc.subjectEQUAL SHARE
dc.subjectEXPECTED VALUE
dc.subjectEXTERNAL FUNDING
dc.subjectEXTERNAL SHOCKS
dc.subjectFINANCIAL DEREGULATION
dc.subjectFISCAL POLICY
dc.subjectFOREIGN ASSETS
dc.subjectFOREIGN DIRECT INVESTMENT
dc.subjectFOREIGN DIRECT INVESTORS
dc.subjectFOREIGN INVESTORS
dc.subjectFOREIGN OWNERSHIP
dc.subjectFORMAL ANALYSIS
dc.subjectGOVERNMENT SPENDING
dc.subjectHIGHER VOLATILITY
dc.subjectHOLDING
dc.subjectINCOME
dc.subjectINDUSTRIAL COUNTRIES
dc.subjectINDUSTRIAL ECONOMIES
dc.subjectINSTRUMENT
dc.subjectINSTRUMENTAL VARIABLES
dc.subjectINSURANCE
dc.subjectINTERACTION TERMS
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL CAPITAL
dc.subjectINTERNATIONAL COUNTRY RISK GUIDE
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL FINANCIAL STATISTICS
dc.subjectINTERNATIONAL INVESTORS
dc.subjectINTERNATIONAL SETTLEMENTS
dc.subjectINVESTMENT RISK
dc.subjectLENDERS
dc.subjectLOAN
dc.subjectLONG-TERM INTEREST
dc.subjectLONG-TERM INTEREST RATES
dc.subjectMACROECONOMIC POLICIES
dc.subjectMACROECONOMIC STABILITY
dc.subjectMACROECONOMIC VARIABLES
dc.subjectMACROECONOMICS
dc.subjectMARGINAL PRODUCTIVITY
dc.subjectNATIONAL BANK
dc.subjectNET FOREIGN ASSETS
dc.subjectOPEN ECONOMY
dc.subjectOUTPUT
dc.subjectOUTPUT VOLATILITY
dc.subjectOVERALL VOLATILITY
dc.subjectPOLICY RESPONSE
dc.subjectPORTFOLIO
dc.subjectPORTFOLIO CAPITAL
dc.subjectPORTFOLIO DEBT
dc.subjectPORTFOLIO INVESTMENT
dc.subjectPORTFOLIO THEORY
dc.subjectPRIVATE CAPITAL
dc.subjectPRIVATE CAPITAL FLOWS
dc.subjectPRODUCTION FUNCTION
dc.subjectREAL GDP
dc.subjectREPAYMENT
dc.subjectREPAYMENT OF PRINCIPAL
dc.subjectREVIEW OF ECONOMICS
dc.subjectRISK SHARING
dc.subjectSAVINGS
dc.subjectSHORT-TERM BORROWING
dc.subjectSTANDARD DEVIATION
dc.subjectSTANDARD ERRORS
dc.subjectTRADE CREDITS
dc.subjectVOLATILE ECONOMIES
dc.subjectVOLATILITIES
dc.subjectVOLATILITY
dc.subjectVOLATILITY MEASURES
dc.subjectWEALTH
dc.subjectWORLD MARKET
dc.subjectWORLD MARKET INTEGRATION
dc.titleThe Effect of Capital Flows Composition on Output Volatilityen
dspace.entity.typePublication
okr.date.disclosure2013-03-01
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2013/03/17458211/effect-capital-flows-composition-output-volatility
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.globalpracticeTrade and Competitiveness
okr.guid116051468161084866
okr.identifier.doi10.1596/1813-9450-6386
okr.identifier.externaldocumentum000158349_20130319084217
okr.identifier.internaldocumentum17458211
okr.identifier.reportWPS6386
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/03/19/000158349_20130319084217/Rendered/PDF/wps6386.pdfen
okr.topicMacroeconomics and Economic Growth::Investment and Investment Climate
okr.topicMacroeconomics and Economic Growth::Economic Conditions and Volatility
okr.topicFinance and Financial Sector Development::Debt Markets
okr.topicPrivate Sector Development::Emerging Markets
okr.topicEconomic Theory and Research
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublicationafa065c7-cfa6-5e06-8ec5-81efc609b489
relation.isAuthorOfPublication49ff004e-c20e-42e0-86da-1daf69ef42d7
relation.isAuthorOfPublication.latestForDiscoveryafa065c7-cfa6-5e06-8ec5-81efc609b489
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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