Abstract
The objective of this paper is to analyze the dynamics of financial flows towards the BRICS in the period 2000-2010. Particularly, the paper examines the impacts of the capital controls adopted by each economy on the movements of specific types of capital registered in their financial accounts. The idea is to show that, regarding financial dynamics, the economies of the BRICS present peculiar characteristics that should be taken into account in the formulation of strategies for global financial regulation. To accomplish this goal, Minsky’s theoretical framework is used as background; the cycles of international liquidity are discussed as well as their impact on the behavior of capital flows toward emerging economies, specially the BRICS. The empirical analysis allows us to highlight the importance of an adequate capital management to attract long-term financial flows that are able to contribute to the productive growth of these economies.
Highlights
The movement of international capital has been a subject of great importance and very much a part of the debate among economists for decades, recently the interest in the negative impacts of unregulated capital flows in developing countries was strongly rekindled
The empirical findings connected to the capital account regulations of each country analyzed suggest that the lower volatility of financial flows can be associated with the adoption of different strategies to manage capital flows
It is relevant to examine the dynamics of financial flows to these economies, in order to show where they stand in terms of external vulnerability and to understand the role of the capital controls adopted
Summary
The movement of international capital has been a subject of great importance and very much a part of the debate among economists for decades, recently the interest in the negative impacts of unregulated capital flows in developing countries was strongly rekindled. It is relevant to examine the dynamics of financial flows to these economies, in order to show where they stand in terms of external vulnerability and to understand the role of the capital controls adopted. The study of the BRICS economies is justified by their economic potential, which results from the size of their GDPs, geographical territories and populations, despite the problems that arise from social differences These countries have presented a faster economic recovery from the Financial Crisis of 2008 than developed countries. The present study aims to help fill this gap, analyzing the capital flows registered in the Balance of Payments of the BRICS from 2000 to 2010 (a period that includes the years prior to the 2008 crisis and the subsequent recovery), in order to understand the dynamics of capital flows directed towards emerging economies. In the final remarks we briefly compare these experiences and draw some conclusions
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