Fueling Or Following Growth? Causal Effects of Capital Inflows on Recipient Economies

Download or read book Fueling Or Following Growth? Causal Effects of Capital Inflows on Recipient Economies written by Mr. Nicolas End and published by International Monetary Fund. This book was released on 2024-01-19 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Identifying the causal impact of capital inflows on growth and development has been a perennial challenge. This paper proposes a new way to investigate the effect of capital flows on recipient emerging and developing economies, using shift-share instruments and correcting for indirect flows. It finds a significantly beneficial effect of loan and bond inflows on economic performance, which materializes after a few years. It also finds some confirmation that the absorptive capacity of recipient economies depends on their fundamentals.