What Moves Capital to Transition Economies?
IMF Working Papers, April 1, 2002
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- What Moves Capital to Transition Economies?
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Bibliographic details
- Authors: Nada Mora, Ratna Sahay, Jeromin Zettelmeyer, Pietro Garibaldi
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451848571.001
Summary
- Time period analyzed: 1991 to 1999.
- Sample: 25 transition economies in Europe and the former Soviet Union.
- Main conclusions:
- Capital flows differed widely across countries in overall levels and in the share and composition of private flows.
- With some exceptions (notably Russia), the main form of private inflows was foreign direct investment.
- Portfolio investment was volatile and concentrated in a handful of countries.
- Regressions indicate that direct investment can be well explained by economic fundamentals.
- For portfolio investment, the presence of a financial market infrastructure and a property-rights indicator are the only explanatory variables that had a robust effect.
Patterns of capital flows
- Overall variation:
- Capital flows to the 25 transition economies differed widely in terms of overall levels and the share and composition of private flows.
- Foreign direct investment (FDI):
- Except for notable exceptions such as Russia, FDI was the main form of private inflows.
- Portfolio investment:
- Portfolio investment was volatile.
- Portfolio investment was concentrated in a handful of countries.
Empirical findings (regressions)
- Direct investment:
- Direct investment can be well explained in terms of economic fundamentals (as found by regression analysis).
- Portfolio investment:
- The only explanatory variables that seem to have had a robust effect on portfolio investment are:
- The presence of a financial market infrastructure.
- A property-rights indicator.
Content in this bundle
- What Moves Capital to Transition Economies? - WP/02/64