Growth from International Capital Flows : The Role of Volatility Regimes /

Recent commentary has downplayed the growth dividend from international financial integration, highlighting the possibly negative correlation between capital inflows and long-run growth. This paper presents new evidence consistent with standard economic theory and a more benign interpretation of cro...

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Bibliographic Details
Main Author: Murshid, Antu
Other Authors: Mody, Ashoka
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2011.
Series:IMF Working Papers; Working Paper ; No. 2011/090
Online Access:Full text available on IMF
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520 3 |a Recent commentary has downplayed the growth dividend from international financial integration, highlighting the possibly negative correlation between capital inflows and long-run growth. This paper presents new evidence consistent with standard economic theory and a more benign interpretation of cross-border private capital flows. The key observation is that a country's growth volatility changes over time. With volatility below a threshold, an inflow of foreign capital has promoted growth. However, during periods of volatile growth, more flows have been associated with slower growth. Volatility levels and changes reflect an interaction of domestic production and institutional structures with global factors. 
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