International Capital Inflows and Poverty: Evidence from Developing Countries.

Poverty reduction is an important one of the long-term global goals. This paper analyses the impact of international capital inflows on poverty with a sample covering 26 developing countries in the Asia-Pacific region. A panel dataset is collected over the period of 1980-2015. The results conclude some new findings, which show international capital inflows have two kinds of effects on the poverty rate. The result shows that remittances and trade openness has positive effects on the poverty rate of the economies. On the other hand, external debt and official development assistance have negative effects on poverty in the region. Our findings lead to some valuable implications, in which, the policymakers need more careful when using the external debt as well as official development assistance to support economic growth because these tools can make the more serious on the poverty in countries. However, the policymakers can use the remittances as an important international capital to solve the lack of internal financial resource. Besides, the result points out that trade openness is a good tool for decreasing the poverty rate by trading with the outside.

An empirical comparison of stock market bubbles

Financial asset bubbles occur due to systematic and continuous differences between fundamental and market values. Due to high growth periods and foreign capital inflows, bubbles are also seen in stock market indexes, especially in emerging market economies. This study analyzes the existence of bubbles in BIST100, IDX COMPOSITE, BOVESPA, MDEX, NIFTY 50, SHANGAI, and S&P 500 stock markets for the period 2009:01-2021:06. RADF, SADF, and GSADF tests are applied to detect bubbles on stock market closing prices. In addition, the emergence and demise dates of the bubbles are determined by employing the date-stamping method. The GSADF test gives more effective results and determines bubbles with different durations in all stock markets, except the S&P 500. The results reveal that the most inefficient market is IDX COMPOSITE, and S&P 500is the most efficient market. The analysis includes the S&P 500, the world's most liquid and most prominent stock market, for comparison. In this respect, bubbles occur more in emerging market exchanges. The findings also confirm the validity of the rational bubble law.

Factors affecting sukuk market development: empirical evidence from sukuk issuing economies

Purpose Both developed and developing countries, Muslim and non-Muslim, have been showing keen interest in sukuk financing. This interest was because of the lesson learned by both Asian and non-Asian economies that having a developed capital market is very essential to enable an economy resilient to the financial crisis. Therefore, this study aims to produce theoretical relationships and identify empirical support for the determinants of sukuk market development. Design/methodology/approach By using panel data analysis, the study covers the period from 1993 until 2017, and includes 13 sukuk issuing economies as per the availability of data. Findings The findings of the study revealed that the stage of economic development, banking system, money supply and current account balance are positively associated with sukuk market. Interestingly, economic size and exports appear to be negatively associated with sukuk. Practical implications To flourish the domestic sukuk market, authorities need to strengthen the existing financial system and economic development. Originality/value The study contributes in a limited body of knowledge on determinants of sukuk market development by exploring novel determining factors of foreign capital inflows as well as macroeconomic and financial factors.

Determinants of Foreign Capital Inflows in Emerging Markets: The Role of Institutional Quality

Purpose: The purpose of the study was to examine the key determinants of foreign direct investment (FDI) and foreign portfolio investment (FPI) in emerging market economies, with greater emphasis placed on the impact of institutional quality. Design/Methodology/Approach: The study applied a panel data system generalised method of moments (GMM) model using annual data spanning the period 2007 to 2017, in respect of 12 emerging market economies. To measure institutional quality, the study adopted the Worldwide Governance Indicators, and constructed a composite index for institutional quality using the Principal Components Analysis (PCA) method. Findings: The results revealed that FDI in the selected emerging markets was attracted by institutional quality and economic growth. Capital account openness, institutional quality and economic growth were positive determinants of FPI. However, stock market development stood out as the key determinant factor for foreign capital inflows. Implications/Originality/Value: The implications of these findings are that, in their pursuit of foreign capital inflows, these emerging markets should continue to liberalise their economies and develop their financial markets. Importantly, such developments must be coupled with the strengthening of the formal governance institutions. Robust institutions would not only curb institutional weaknesses that deter international capital inflows, but would also insulate emerging markets from unfavourable effects of volatile capital flows.

The impact of foreign capital inflows on poverty in Vietnam: An empirical investigation

This study investigates the impact of foreign capital inflows on poverty in Vietnam, using annual time series data from 1990 to 2018. The study was motivated by the need to establish if burgeoning foreign capital inflows in Vietnam can support the poverty alleviation agenda. Foreign direct investment (FDI) and external debt were used as proxies for foreign capital inflows; and infant mortality rate, Human Development Index (HDI) and household consumption expenditure were used as poverty proxies. Using the autoregressive distributed lag (ARDL) approach, the study found foreign direct investment to reduce poverty in the short run and long run when household consumption expenditure was used as a poverty measure. However, the study found FDI to worsen poverty in the short run when infant mortality rate and HDI were used as poverty proxies. The study found external debt to have poverty mitigating effect in the short run regardless of the poverty measure used and in the long run only when household consumption expenditure was used as a poverty measure.

FOREIGN CAPITAL INFLOWS IN CENTRAL AND EAST EUROPEAN COUNTRIES

Free cross-border movement of goods and capital correlates with the general economic state of a country in both apparent and subtle ways. The intensity of financial and economic interactions with the outside world is an indicator of the sustainability and efficiency of the national economy. After joining the EU, all Member States liberalized the balance of payments (BoP), i.e. ensured free and unrestricted cross-border movement of goods and capital. For certain countries the liberalization of BoP was a considerable challenge, which they managed to successfully overcome. These were the EU countries of the Council for Mutual Economic Assistance (CMEA) was active among the former socialist countries until 1990, or the so-called "CMEA-EU countries". For an economic comparison to be plausible, it has to be made between the dynamics of comparable economies. Such a group of economies is formed by the CMEA-EU countries. EU membership provided them with the opportunity to use on their own their potential in property, intellect, power and resources. This is the reason why the present study has adopted a comparative analysis based on CMEA-EU countries. An attempt has been made to comprehensively monitor and analytically assess all major financial flows, especially in the CMEA-EU countries, and their impact on economic dynamics. A comparison is made for both the positive and negative aspects of the incoming financial resources in these countries. Particular emphasis is placed on macroeconomic elements and policies that outline, create conditions, and predetermine the scale, interactions and projections of cross-border financial flows.

Analysis of International Capital Inflows and Institutional Quality in Emerging Markets

This study investigates the cointegrating and causality relationships between foreign direct investment (FDI), foreign portfolio investment (FPI) and institutional quality in a sample of 12 emerging market economies for the period from 2007 to 2017. A composite index for institutional quality composed of the Worldwide Governance Indicators was constructed using the Principal Components Analysis (PCA) method. The panel autoregressive distributed lag (ARDL) model and the error correction model (ECM) were applied to assess the cointegrating and causal relationships between the key variables. In addition to finding significant cointegrating relationships between institutional quality and the foreign capital inflows (FDI and FPI), the results confirmed unidirectional causality from FDI and FPI to institutional quality in the long run. The results further suggested that the long-run relationship between the two foreign capital inflows was more of a trade-off nature, dependent upon the dynamics of the institutional environment in the host economy. The recommendations suggested include that emerging markets should continue to open their economies in pursuit of capital inflows, which will reciprocally strengthen their domestic institutional environment. Strengthening institutions could curtail the persistence of institutional weaknesses and insulate emerging economies from the adverse effects of volatile capital flows and, over the long run, enhance capital inflows.