Capital Flows in a Globalized World: The Role of Policies and Institutions
62 Pages Posted: 20 Dec 2005 Last revised: 18 Dec 2021
Date Written: October 2005
We describe the patterns of international capital flows in the period 1970 - 2000. We then examine the determinants of capital flows and capital flows volatility during this period. We find that institutional quality is an important determinant of capital flows. Historical determinants of current legal institutions have a direct effect on foreign investments. Policy plays a significant role in explaining the changes in the level of capital flows over time and their volatility.
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