The volatility of capital flows to emerging markets and financial services trade

  • This paper examines empirically the question whether the presence of foreign banks and a liberal trade regime with regard to financial services can contribute to a stabilization of capital flows to emerging markets. Since foreign banks, so the argument goes, provide better information to foreign investors and increase transparency, the danger of herding is reduced. Previous findings by Kono and Schuknecht (1998) confirmed empirically that such an effect does exist. This study expands their data set with respect to the length of the time period and the number of countries. Contrary to Kono and Schuknecht, it is found that foreign bank penetration tends to rather increase the volatility of capital flows. The trade regime variables are not significant in explaining cross-country variations in the volatility of capital flows. This result does not change significantly when alternative measures of volatility are considered. This paper was presented at the conference ''Financial crisis in transition countries: recent lessons and problems yet to solve'' on 13-14 July 2000 at the Institute for Economic Research (IWH) in Halle, Germany.

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Author:Roland Beck
Parent Title (German):Institut für Kapitalmarktforschung (Frankfurt am Main): CFS working paper series ; No. 2000,11
Series (Serial Number):CFS working paper series (2000, 11)
Document Type:Working Paper
Year of Completion:2000
Year of first Publication:2000
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:corporate rating; credit risk management; financial intermediation; information aggregation; long-term lending
GND Keyword:Schwellenländer; Finanzdienstleistung; Dienstleistungsverkehr; Unsichtbarer Handel; Internationale Bank; Internationale Kapitalbewegung; Kapitalmobilität; Volatilität; Kapitalmarkt; Regulierung; Kreditmarkt; Emerging Market; Schätzung
Issue:August 2000
Page Number:26
Revised Version published in: Russian and East European Finance and Trade, Vol. 37, No. 3, (May-June 2001).
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht