What Factors Appear to Drive Private Capital Flows to Developing Countries? And How Does Official Lending Respond?

The authors study what drives private capital flows to developing countries, as well as the apparent response of official lending for the years 1978-97. Econometric results reveal that non-foreign direct investment portfolio flows to a country tended to rise in response to: 1) An increase in the current account deficit. 2) A rise in foreign direct investment flows. 3) Higher per capita income. 4) Growth performance. Once those variables were accounted for, private flows did not seem to be influenced by location, and regional factors. In addition, private capital flows (whether foreign direct investment or not) seem to respond positively (with a one-year lag) to World Bank lending commitments. By far the most important determinant of official lending to a developing country, seems to be the external current account balance, or a change in international reserves in the country. Official flows - including World Bank lending - appear to have played a stabilizing (or counter-cyclical) role in response to the volatility of private capital flows, and fluctuations in commodity prices, and GDP growth. (The stabilizing effect is weak, as official flows are only one-tenth of total long-term flows).

Bibliographic Details

Main Authors:	Dasgupta, Dipak, Ratha, Dilip
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2000-07
Subjects:	ADJUSTMENT LENDING, AGGREGATE LEVEL, ALLOCATION MODELS, BALANCE OF PAYMENTS, BANK LENDING, BANK LOANS, BENCHMARK, BLEND COUNTRIES, BONDS, BORROWING, BORROWING COUNTRIES, CAPITAL FLOWS, CAPITAL MARKETS, COMMERCIAL BORROWING, COMMERCIAL LOANS, COUNTRY LEVEL, COUNTRY SPECIFIC, CREDIT RATIONING, CREDIT RISK, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICIT, CYCLICAL BEHAVIOR, DEBT, DECISION MAKING, DEPENDENT VARIABLE, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPING WORLD, DEVELOPMENT ECONOMICS, ECONOMETRIC ANALYSIS, ECONOMIC CONDITIONS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, EMPIRICAL RESULTS, EXOGENOUS VARIABLES, EXPLANATORY VARIABLES, FINANCIAL ASSETS, FINANCIAL CRISIS, FINANCIAL FLOWS, FINANCIAL INSTITUTIONS, FINANCIAL MARKETS, FISCAL YEAR, FORECASTS, FOREIGN EXCHANGE, GDP, GLOBAL MARKETS, GLOBALIZATION, GNP, GROWTH PERFORMANCE, GROWTH RATE, HIGH VOLATILITY, INCOME DEVELOPING COUNTRIES, INCOME GROUP, INCOME LEVELS, INDEPENDENT VARIABLES, INDUSTRIAL COUNTRIES, INFLATION, INFLATION RATE, INFLATION RATES, INTEREST RATES, INTERNATIONAL RESERVES, LAGGED DEPENDENT, LIQUIDITY, LOW- INCOME COUNTRIES, LOW-INCOME COUNTRIES, MACROECONOMIC VARIABLES, MATURITIES, MIDDLE-INCOME COUNTRIES, MORAL HAZARD, NEGATIVE EFFECT, NEGATIVE SIGN, PER CAPITA, PER CAPITA INCOME, PER CAPITA INCOMES, POLICY REFORMS, POLICY RESEARCH, PORTFOLIO, PRIMARY COMMODITIES, PRIVATIZATION, QUANTITATIVE ANALYSIS, RAPID GROWTH, REAL EXCHANGE, REAL EXCHANGE RATE, REAL EXCHANGE RATES, REAL INTEREST, REAL INTEREST RATE, REAL INTEREST RATES, REAL PRICES, REDUCED FORM EQUATION, REGIONAL DISTRIBUTION, RELATIVE IMPORTANCE, RISING DEMAND, RISING TREND, SHARP FALL, SIGNIFICANT FACTOR,
Online Access:	http://documents.worldbank.org/curated/en/2000/07/436951/factors-appear-drive-private-capital-flows-developing-countries-official-lending-respond http://hdl.handle.net/10986/19821
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