Portfolio Flows, Volatility and Growth

42 Pages Posted: 7 Dec 2003

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Paul A. Laux

University of Delaware - Alfred Lerner College of Business and Economics

Date Written: May 2004

Abstract

We study the realized openness to portfolio flows of economically more- developed and less-developed countries as it affects future GDP growth. Outflows of a country's funds into U.S. securities are predictive of GDP growth. Both inflows and outflows of funds via local equity securities are predictive of growth but only for more-developed countries. Country-specific volatility in flows does not detract from growth, and volatility in world-wide flows precedes growth. This is evidence that financial openness enables country's economic development, but only if the country s already economically and financially developed. The evidence is consistent with thinking that the benefits of financial integration accrue mainly in the presence of well-developed sets of financial, legal, and political institutions.

Keywords: Portfolio Flows, Financial Integration, Growth, Economic Development

JEL Classification: F21, F36, G15, G38

Suggested Citation

Ferreira, Miguel Almeida and Laux, Paul A., Portfolio Flows, Volatility and Growth (May 2004). Available at SSRN: https://ssrn.com/abstract=475741 or http://dx.doi.org/10.2139/ssrn.475741

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Paul A. Laux (Contact Author)

University of Delaware - Alfred Lerner College of Business and Economics ( email )

Office 306 Purnell Hall
Newark, DE 19716
United States
302-831-6598 (Phone)
302-831-3061 (Fax)

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