What Factors Appear to Drive Private Capital Flows to Developing Countries? And How Does Official Lending Respond?
The authors study what drives private capital flows to developing countries, as well as the apparent response of official lending for the years 1978-97. Econometric results reveal that non-foreign direct investment portfolio flows to a country tend...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/07/436951/factors-appear-drive-private-capital-flows-developing-countries-official-lending-respond http://hdl.handle.net/10986/19821 |
| Summary: | The authors study what drives private
capital flows to developing countries, as well as the
apparent response of official lending for the years 1978-97.
Econometric results reveal that non-foreign direct
investment portfolio flows to a country tended to rise in
response to: 1) An increase in the current account deficit.
2) A rise in foreign direct investment flows. 3) Higher per
capita income. 4) Growth performance. Once those variables
were accounted for, private flows did not seem to be
influenced by location, and regional factors. In addition,
private capital flows (whether foreign direct investment or
not) seem to respond positively (with a one-year lag) to
World Bank lending commitments. By far the most important
determinant of official lending to a developing country,
seems to be the external current account balance, or a
change in international reserves in the country. Official
flows - including World Bank lending - appear to have played
a stabilizing (or counter-cyclical) role in response to the
volatility of private capital flows, and fluctuations in
commodity prices, and GDP growth. (The stabilizing effect is
weak, as official flows are only one-tenth of total
long-term flows). |
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