China has experienced a dramatic swing from net capital inflows to large net outflows in recent years. Using balance of payments data, an analysis of the underlying factors that drove China’s recent capital outflows since mid-2014 were (1) corporates adjusting their balance sheets to reduce foreign exchange exposure or to unwind “carry trade”; (2) Chinese corporate and households seeking to div...

All industrialized nations relied on capital account controls for significant periods of their economic development and relaxations of capital account restrictions thought to be an integral aspect of economic development. Economists long advocated the removal of capital controls as a stabilizing factor of the development process to improve efficiency and return economies from distorted factor p...

This study investigates the cointegrating and causality relationships between foreign direct investment (FDI), portfolio (FPI) institutional quality in a sample of 12 emerging market economies for period from 2007 to 2017. A composite index composed Worldwide Governance Indicators was constructed using Principal Components Analysis (PCA) method. The panel autoregressive distributed lag (ARDL) m...

International capital flows and the operation of multinational enterprises (MNEs) are influenced by several socioeconomic political factors. Among them, low labor cost is listed among determinants that attract foreign capital, primarily direct investment (FDI) inflows, which in various cases attributed to unskilled employees, including working children. Working children, mainly developing count...

Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease host-country firms' financing constraints. However, if incoming foreign investors borrow heavily from domestic banks, multinational firms may exacerbate financing constraints by crowding host-country firms out of domestic capital markets. Combinin...

This paper proposes a macroeconomic model with financial intermediaries (banks), in which banks face occasionally binding leverage constraints and may endogenously affect the strength of their balance sheets by issuing new equity. The model can account for occasional financial crises as a result of the nonlinearity induced by the constraint. Banks’ precautionary equity issuance makes financial ...