Global uncertainty and capital flows: any difference between foreign direct investment and portfolio investment?

In an attempt to attained sustainable level of economic development in a nation, empirical studies as well as financial theories posit that foreign capital inflows play a lead role. As such, this study set out to empirically investigate the extent to which foreign capital flows promotes economic development in Nigeria. Time series data between the periods 1986 to 2018 were sourced from the central bank of Nigeria statistical bulletin and world bank data based. The study proxied foreign capital flows using foreign direct investment, foreign portfolio investment, foreign aids and external borrowings which is decomposed into multilateral and bilateral loans while Human development index is used as proxy for economic development. The study further employed unit root test, co-integration test, error correction model and granger causality test to ascertain the direction of relationship. Findings reveal that of the five indices of foreign capital inflows, three (foreign portfolio investment, foreign aids and bilateral loan) prove to be significant in promoting economic development in Nigeria, while foreign direct investment and multilateral loan are negatively related to economic development in Nigeria. As such, the study conclude that foreign capital inflows in the form of foreign portfolio investment, foreign aids and bilateral loans are significant in boosting economic development in Nigeria. Therefore, we recommend that managers of the Nigerian economic should create an enabling financial environment as this will help in accelerating further inflows of portfolio investment and thus boost economic development in Nigeria.

Download Full-text

Capital flows and political conflicts: Evidence from Thailand

The Economics of Peace and Security Journal ◽

10.15355/epsj.15.2.83 ◽

2020 ◽

Vol 15 (2) ◽

Author(s):

Pongsak Luangaram ◽

Yuthana Sethapramote

Keyword(s):

Foreign Direct Investment ◽

Capital Flows ◽

Direct Investment ◽

Military Coup ◽

Portfolio Investment ◽

Martial Law ◽

Foreign Portfolio Investment ◽

Political Conflicts ◽

Different Types ◽

Negative Effect

How do domestic political conflicts affect capital flows into Thailand? This article advances the current understanding in two ways. First, it adopts a new method for measuring political uncertainty using Thai-language newspapers over the past 20 years. Given that the nature of political conflicts is multi-faceted, these measures cover the various key components of Thai political tensions—both within and outside of parliament. Second, how different types of tensions affect capital flows are examined using a quantile regression framework—allowing an examination of effects upon the overall distribution of capital flows. The empirical results indicate that Thai political conflicts significantly and adversely affect both foreign direct investment and foreign portfolio investment at the left tails of their distribution. The results also highlight how different types of political conflicts affect capital flows in different ways. For example, uncertainty about a military coup and government measures regarding martial law or emergency decrees have a strong negative effect upon foreign direct investment flows; whereas heightened political protest and news about constitutional reform play a significant role in explaining the risk reversal of foreign portfolio investment flows.

Download Full-text

External and Internal Factors of Cross-Border Capital Flows in Russia

The world of new economy ◽

10.26794/2220-6469-2019-13-4-41-50 ◽

2019 ◽

Vol 13 (4) ◽

pp. 41-50 ◽

Cited By ~ 1

Author(s):

M. Yu. Golovnin ◽

G. R. Oganesian

Keyword(s):

Growth Rate ◽

Foreign Direct Investment ◽

Interest Rates ◽

Capital Flows ◽

Direct Investment ◽

Portfolio Investment ◽

Financial Assets ◽

Internal Factors ◽

Factors Affecting ◽

Cross Border

The literature on the assessment of factors affecting cross-border capital flows is usually characterised by distinguishing of external and internal factors. The former as a rule include international indices of the global economic growth rate, interest rates and other indicators of profitability (for certain types of financial assets). The latter include domestic indices of the growth rate of the national economy, interest rates and the profitability of financial instruments, sovereign credit ratings. Since the beginning of the 21st century, cross-border capital flows in Russia have followed the same trends as capital flows in other emerging markets. A distinguishing feature of Russia was the negative impact of sanctions on the level of its financial openness. We estimated regressions, designed to evaluate the factors affecting the individual components of cross-border capital flows in Russia. Regressions for the three types of flows (liabilities of direct investment and portfolio investment liabilities, and assets) demonstrate good results. Among external factors, the dynamics of oil prices turned out to be significant, as well as the global stock index (for portfolio investment assets). Among internal factors, an increase in aggregate demand helps to attract foreign direct investment, and an increase in the yield of Russian financial assets (stocks and bonds) — to attract portfolio investments. The difference in interest rates is the determinant of all analysed capital flows. Our estimations confirmed the significance of the “round-tripping” movement of foreign direct investment in Russia.

Download Full-text