The Composition of Capital Flows: Is South Africa Different?

29 Pages Posted: 10 Jan 2006

See all articles by Faisal Ahmed

Faisal Ahmed

International Monetary Fund (IMF) - African Department

Rabah Arezki

International Monetary Fund (IMF)

Norbert Funke

International Monetary Fund (IMF) - African Department

Date Written: March 2005

Abstract

Over the past decade, South Africa has attracted relatively little foreign direct investment (FDI), but considerable amounts of portfolio inflows. In this context, the objective of the paper is twofold: to identify the determinants of the level and composition of capital flows to emerging markets and to draw policy conclusions for South Africa. We estimate a dynamic panel for up to 81 emerging markets using GMM (Generalized Method of Moments) techniques. The results suggest that further trade and capital control liberalization would increase the share of FDI. Additionally, a reduction in exchange rate volatility would affect the composition of capital flows in favor of FDI.

Keywords: Composition of capital flows, exchange rate volatility, financial development

JEL Classification: F21, F31, F32

Suggested Citation

Ahmed, Faisal and Arezki, Rabah and Funke, Norbert, The Composition of Capital Flows: Is South Africa Different? (March 2005). IMF Working Paper No. 05/40. Available at SSRN: https://ssrn.com/abstract=874262

Faisal Ahmed (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Rabah Arezki

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Norbert Funke

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

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