Patterns of Capital Flows to Emerging Markets : A Theoretical Perspective


Zhaohui Chen ; Mohsin S. Khan

Publication Date:

January 1, 1997

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate


This paper reviews some of the basic patterns of international capital flows to emerging markets in recent years, including the composition of capital flows, intraregional flow patterns, and the geographical distribution of the flows. A theoretical model that sheds new light on these observed patterns is developed. This model focuses on the cost of financing aspect of capital flows, and shows that the patterns of capital flows are influenced by the combined effects of financial market development and growth potential in the recipient countries. The theoretical predictions of the model are shown to be consistent with the stylized facts.


Working Paper No. 97/13


Publication Date:

January 1, 1997



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