I thank Hongwei Bian for superb research assistance and several colleagues for comments on an earlier draft.
IMF, World Economic Outlook, October 2001, World Economic and Financial Surveys (Washington), pp. 145–73.
Ashoka Mody and Antu Murshid, “Growing Up with Capital Flows,” IMF Working Paper 02/75, 2002. For more recent developments, see IMF, Global Financial Stability Report: Market Developments and Issues, June 2002, World Economic and Financial Surveys (Washington).
Philip Lane and Gian Maria Milesi-Ferretti, “The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries,” Journal of International Economics, Vol.55 (December 2002), pp. 263–94. Their subsequent work, “Long-Term Capital Movements,” in NBER Macroeconomics Annual 2001, Vol. 16 (Cambridge, MA: MIT Press, 2002) [also IMF Working Paper No. 01/107, 2001], identifies the long-term factors driving the evolution of countries’ net external positions.
Hali Edison and Francis Warnock, “A Simple Measure of the Intensity of Capital Controls,” IMF Working Paper No. 01/180, 2001.
For a recent survey of the literature on what drives FDI, see Ewe-Ghee Lim, “Determinants of, and the Relation Between, Foreign Direct Investment and Growth: A Summary of the Recent Literature,” IMF Working Paper No. 01/175, 2001.
The push factor Mody and Murshid use is total capital flows to developing countries rather than the industrialized country interest rates used in earlier work. The assumption is that shocks to the supply of capital are correlated across countries and that no one country is large enough to have a significant influence on total flows of capital. Ashoka Mody and Mark Taylor, “International Capital Crunches: The Time-Varying Role of Informational Asymmetries,: IMF Working Paper No. 02/43, departs from the push/pull framework in favor of identification of demand and supply curves in an disequilibrium framework. Mody and Taylor find that information asymmetries, and hence variables, such as risk premia on junk bonds, are crucial in determining the supply of capital to emerging markets.
Hali Edison and Francis Warnock, “Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets,” forthcoming IMF Working Paper. Eduardo Borensztein and R. Gaston Gelos, “A Panic-Prone Pack? The Behavior of Emerging Market Mutual Funds,” forthcoming, IMF Staff Papers. R. Gaston Gelos and Shang-Jin Wei, “Transparency and International Investor Behavior,” forthcoming IMF Working Paper, 2002.
For more on the determinants of the composition of capital inflows see Mark Carlson and Leonardo Hernandez, “Determinants and Repercussions of the Composition of Capital Inflows,” IMF Working Paper No. 02/86, 2002.
Pietro Garibaldi, Nada Mora, Ratna Sahay, and Jeromin Zettelmeyer, “What Moves Capital to Transition Economies,” IMF Staff Papers, Vol. 48, Special Issue (2001). See also Leslie Lipschitz, Timothy Lane, and Alexandros Mourmouras, “Capital Flows to Transition Economies: Master or Servant?” IMF Working Paper 02/11, 2002. They conclude that capital flows can be a useful servant by fostering development but also a cruel master by rendering economies more vulnerable to global capital market conditions.
Philip Lane and Gian Maria Milesi-Ferretti, “External Capital Structure—Theory and Evidence,” IMF Working Paper No. 00/152, 2000; also published in The World’s New Financial Landscape: Challenges for Economic Policies, ed. by Horst Siebert (Berlin- Heidelberg: Springer Verlag, 2001). Shang-Jin Wei and Yi Wu, “Negative Alchemy?: Corruption, Composition of Capital Flows and Currency Crisis,” NBER Working Paper No. 8187, 2001. Peter Montiel and Carmen Reinhart, “Do Capital Controls and Macroeconomics Policies Influence the Volume and Composition of Capital Flows?: Evidence from the 1990s,” Journal of International Money and Finance, Vol. 18, No. 4, pp. 619–35.
Carmen Reinhart and Kenneth Rogoff, “Foreign Direct Investment to Africa: The Role of Price Stability and Currency Instability,” paper presented at the Annual Bank Conference on Development Economics, April 2002. Anupam Basu and Krishna Srinivasan, “Foreign Direct Investment in Africa—Some Case Studies, “IMF Working Paper No, 02/61, 2002.
Eduardo Borensztein, Jose de Gregorio, and Jong-Wha Lee, “How Does Foreign Investment Affect Growth?” Journal of International Economics, Vol. 45 (June), pp. 115–35. Hali Edison, Ross Levine, Luca Ricci, and Torsten Slok, “International Financial Integration and Economic Growth,” forthcoming, Journal of International Money and Finance. See also Hali Edison, Michael Klein, Luca Ricci and Torsten Slok, “Capital Account Liberalization and Economic Performance: Survey and Synthesis,” forthcoming IMF Working Paper, and Chapter 3 in the forthcoming World Economic Outlook, October 2002 (Washington: International Monetary Fund).