International Capital Movements Research Articles

Глобализация индийской экономики: тенденции и перспективы

The aim of this research is the analysis of the globalization model of the Indian economy, its main trends and perspectives. The article highlights the ways of India’s integration in the world economy –its participation in the international capital movement and in the international trade as well as its positions in global value chains. The author examines the most representative definitions of globalization and draws attention that the theoretical basis of the study is the synthesis of the concept of global value chains and A.P. Thirlwall’s definition of globalization. The methodological basis of the study is such methods as induction and deduction, analysis and synthesis. The systematic approach to the overall study of the Indian economy and the Indian external economic policy in particular has become the base of this research. The author underlines that according to the OECD data the Indian participation in global value chains is 42% of the Indian gross exports. At the same time India as a large economy has a less share of exports made of inputs taking part in vertical trade in comparison with other developing countries due to diversified national economy created during the importsubstitution period. The author notes Indian positions in international capital movement. The author stresses that the Indian contemporary investment policy is aimed at attracting foreign capital that doesn’t lead to the formation of external debt. The article highlights the Indian positions in international trade of goods and services. The author examines the composition of Indian exports and imports as well as direction of Indian trade. The author draws attention to increasing the Indian positions in trade in intermediate goods. It proves the active participation of India in global value chains. The article presents statistical data on the Grubel-Lloyd Index which measures India and the world economy intra-industry trade as well as RCA coefficient which measures the comparative advantages of the Indian economy in trade both in goods and services. The article also presents statistical data on the dynamics of the Indian external trade, foreign direct investments’ inflow and exports of the Indian capital.

Sustainable development of local communities in Serbia and FDI

Foreign direct investment as the most common form of international capital movements are very important factors in the development of each economy. Given the fact its characteristics in terms of the impact on long-term economic development, foreign direct investment offer the possibility of achieving goals of sustainable development. In the terms that the effects of foreign capital does not manifest in the same way at all levels in the host country, the paper gives the importance of foreign direct investment for strength the capacity of local communities in achieving the goals of sustainable development. The point of the paper is to show movement of foreign direct investments in municipalities and cities in Serbia and to provide useful recommendations for improving the business climate to attract foreign direct investment in local communities. Starting from the fact that the needs of local communities in Serbia to attract foreign direct investment are big, at the end of the paper it is given that investment location are the most important determinants of the host country by foreign investors when making investment decisions.

국제자본이동과 무역비용이 산업구조에 미치는 영향

국제자본이동과 무역비용이 산업구조에 미치는 영향

Determinants of co-movement and of lead and lag behavior of business cycles in the Eurozone

In this paper we study business cycle correlations in the Eurozone and its determinants. Additionally, we also analyze the determinants of the lead and lag behavior of business cycles in the Eurozone. We explore the relevance, in the Eurozone context, using GDP and employment as the business cycle measures, of the determinants of business cycle synchronization identified in the literature, namely bilateral trade intensity, dissimilarity of labor market rigidity, dissimilarity in industrial structures, financial openness, and foreign direct investment relations. We estimate a simultaneous 4-equations model by Ordinary Least Squares (OLS) and three-stage least square to investigate empirically the above-mentioned determinants of business cycle correlation. Bilateral trade relations present a positive influence on business cycle correlations, while the dissimilarity of labor market rigidity presents a negative influence. The rest of the above-mentioned variables are non-significant. These results are robust to the use of the Hodrick–Prescott-filter and first differences as the de-trending methods, as well as the use of GDP as the business cycle measure, excluding the financial crisis years (2008 and 2009). Results for employment as the business cycle measure are in contrast with the previous ones, and found industrial dissimilarity to be the relevant variable to determine business cycles synchronization. In what concerns the determinants of the lead and lag behavior, results show that the member states of the Eurozone that usually lead the cycle are the ones that are wealthier, with strict employment legislation, more specialized in construction and finance sectors, and more prone to international capital movements. Differences in the determinants between contemporaneous business cycles and lead and lag behavior of business cycles are especially important for policy-makers in the Eurozone to know about, in particular if asymmetric shocks between countries are set in place.

FDI and Business Internationalization of the Unorganized Sector: Evidence from Indian Manufacturing

Available evidence, though limited to the organized sector only, suggests that FDI flowing in with MNE activities or direct FIIs generate technological and market access spillovers for firms outside the core group in destination countries. We investigate the organizational link between formal and informal sectors in India and argue that the spread of internationalization is more when production outsourcing prevails between such units. Higher wage in the organized sector is a factor that breaks standard institutional barriers leading to outsourcing of production to informal units. The evidence is puzzling to the extent that foreign capital and better know-how as drivers of international business to developing countries usually relax the credit constraint facing formal sector units at the destination and cause expansion of formal units. Using a measure of technology and a panel data for a large number of industrial units in India, we show that FDI transmitted through technology spillover leads to significant increase in the gross value added for several industries located in the informal sector. The paper points out that production re-organization associated with international capital movements should provide additional insights for standard measures of internationalization of production and services.

Forms of international movement of capital with special emphasis on the PPP and concessions

The state has always cooperated with the private sector in order to implement various activities in the best interest of public. The first models of public-private partnerships (PPP) appeared at the time of the Roman Empire in the context of public works in construction of public baths, markets and ports. Contemporary international movement of capital is a phenomenon that has existed for over a century. When discussing the PPP in modern day terms, the expansion of private involvement in the public sector starts in the 1970s and the 1980s of the previous century, in public infrastructure projects and in most developed economies. The primary purpose of these arrangements is to reduce expenditures in state budgets, but also to achieve faster and better execution of work, reduce risk and efficiently manage the projects. This paper will briefly present the evolution of PPPs and concessions, with an emphasis on understanding money and capital throughout the evolution of PPP, contemporary forms of movement of capital, as well as equity in terms of globalization. The subject of this paper are also examples of the important PPPs and concessions from the construction of the Suez Canal until today.

Contemporary forms of international movement of capital

International movement of capital is one of the most important forms of international economic cooperation and achievement of strategic goals of enterprises. It leads to international diversification of business activities, strengthening of competitive advantage, changes in economic structures, employment rates and economic stability of participating countries. The present research addresses the contemporary forms of international movement of capital, with an emphasis on the public-private partnerships and concessions. The creation of different forms of public-private partnerships (PPPs) in Serbia gained in importance in the early ‘90s of the 20th century. PPP implies joint activities within the framework of which the public and private sector pool resources, especially financial capital and expertise in order to meet the public needs of local, regional or national significance for adequate resource allocation. This type of partnership between the public and private sector has become an effective way towards a more rational use of limited resources and development of business entities from different sectors. The partnership of the public and private sector is particularly important in the construction and maintenance of transportation and other infrastructure facilities. Concessions represent a special form of public-private partnerships.

Инвестиционные эффекты ПТС: качество соглашений имеет значение

We develop a theoretical model of international capital movement in form of FDI. Our theoretical model describes non-linear impact of heterogeneous preferential trade agreements (PTAs) on FDI. In order to quantify PTAs heterogeneity we develop a methodology of PTAs classification. Using the methodology, we quantified a quality of more than 200 PTAs (out of 380 existing globally). Our model predicts that impact of PTA on FDI will depend on observed quality of PTA while marginal investment effect of PTAs will decrease with PTAs' quality improvement. Empirically, we show that use of simple dummy for PTAs without taking into account PTAs heterogeneity and the non-linear effects of PTA on FDI overestimate the investment effects of PTAs up to 100%. Bilateral PTAs within CIS insignificantly affects FDI between countries - maximum investment effects of such agreements are estimated at 19%. Multilateral PTAs have a significant investment effects: FDI between signatories of multilateral PTAs rose up to 71%.

Мировая финансовая система: глобализация или деглобализация?

The paper investigates the current phases of world financial system’s (WFS) development that was identified on the base of Obstfeld-Taylor index describing international capital movement. It is shown that in order to differentiate the main periods of WFS life-cycle one should investigate the first and the second waves of financial globalization. The respective analysis mainly includes comparison of financial deglobalization/globalization process evidences in the wake of global financial crises. On the one hand, almost all global financial markets (except global currency market) demonstrated downturns and/or sharp slowdowns in overall performance during 2007-2009. For example, global banking demonstrated the “flight home” effect. On the other hand, the author consolidated the analysis of the pre-crisis and 2010-2014 financial data, geographical changes in global credit market, global currency market’s dynamics during 2004-2013, shadow banking and VIX-index trends, initiatives on global financial reforms. This showed that the financial world is not becoming deglobalized in medium-term perspective. Moreover, according to author’s research, financial globalization currently undergoes a deep systemic transformation, including a wider geography of its main driving forces. Still, it is not excluded that deglobalization trend is possible in a long-run perspective because of global financial crisis lasting since 2007, persistence of “contagion effect” and deeply linked multiple financial bubbles in the world financial system, high volatility of financial and some other markets. It is supposed that once started processes of deglobalization can be immediately transferred from financial sphere to the world economy. Finally, author outlines necessary conditions for continuing evolutionary financial globalization process. Acknowledgements. The article was prepared with support of the grant of Russian Fund for Humanities (Project № 15-02-00391 “Russian monetary and budgetary policy during current phase of global economic development”).

BRICS Countries in International Capital Movement

Geography of capital outflow and inflow to BRICS countries is considered. The prerequisites of capital outflow and inflow to these states are analyzed. The orientation of capital export and import from these countries to offshores and offshore-conduit states is underlined. The attempt is made to discover the reasons of high offshorization of BRICS countries’ outflow and inflow of capital. Author’ hypothesis explaining these reasons is put forward. It is based on the thesis of weak institutional structure of BRICS and other developing countries first of all insufficient protection of entrepreneurs, high level of shadow and criminal business as well as underdevelopment of civil law in these states.

Optimal education in times of ageing: The dependency ratio in the Uzawa–Lucas growth model

The increasing share of retirees puts pressure on the shrinking working generation which will need to produce more output per worker to ensure a constant standard of living. We investigate the influence of a changing dependency ratio has on the time individuals spend in education and production. Longer education will increase productivity in the future, but will lower production in the short run, whereas an increase in labour input at the cost of education will provide more production immediately. We introduce a dependency ratio into a discrete-time Uzawa–Lucas model with international capital movements, human capital externalities and decreasing returns to labour in human capital formation. The dependency ratio is defined as the fraction between inactive and active individuals in regard to work or education. By calibration of the model, we find multiple steady states indicated by a u-shaped relation between education time-shares and the growth rate of the dependency ratio. Near the stable, high-level steady state, the optimal response to higher growth of the dependency ratio is more education to enhance productivity. We find evidence for this relation for 16 OECD countries. As a model extension, a debt-dependent interest rate has been introduced and estimated.

The Determinants of International Capital Movements and an Analysis in the Context of Foreign Direct Investments: A Case of Turkey

Uluslararasi sermaye hareketlerinin en buyuk ayagini olusturan dogrudan yabanci yatirimlar; yabanci bir ulkede yeni bastan fabrika kurulmasi ya da mevcut bir sirkete ortak olunmasi veya kurulu sirketin satin alinmasi seklinde gerceklestirilen, yatirimcisina yonetime katilma hakki saglayan yatirimlar olarak degerlendirilmektedir. DYY’ler istihdam, teknoloji, isletme bilgisi, uluslararasi piyasalara entegrasyon ve rekabet ortaminin olusturulmasi noktasinda ekonomik gelismeye buyuk katkilar saglamaktadir. DYY’lerin ulke ekonomilerine sagladigi faydalar ve bu yatirimlarin ulke ekonomileri acisindan onemi goz onune alindiginda, DYY’lerin ulke ekonomilerini tercihindeki ekonomik faktorlerin saptanmasi DYY girislerinin surekliliginin saglanmasi acisindan buyuk onem arz etmektedir. Bu baglamda bu calismada dogrudan yabanci yatirimlari belirleyen faktorler tahmin edilmis ve bu faktorlerin dogrudan yabanci yatirim girisleri ile olan iliskisi tespit edilmistir. DYY’lerin ekonomik belirleyicileri GSYIH, ticari aciklik, birim iscilik maliyeti ve enflasyon olurken, DYY’lerin GSYIH, ticari aciklik ve birim isci maliyetinden pozitif, enflasyondan negatif etkilendigi tespit edilmistir.

The International Regulatory Regime on Capital Flows and Trade in Services

Capital controls and exchange restrictions are used to restrict international capital flows during economic crises. This paper looks at the legal implications of these restrictions and explores the current international regulatory framework applicable to international capital movements and current payments. It shows how international capital flows suffer from the lack of a comprehensive and coherent regulatory framework that would harmonize the patchwork of multilateral, regional, and bilateral treaties that currently regulate this issue.

The Collapse of Soviet Trade and Finland's Great Depression of the 1990's: A Re-Examination

The paper re-examines the role of the collapse of Soviet/Russian trade in the Finnish depression of the 1990’s, using time series analysis based on a theoretical open macro model. It is shown that empirically, the strong credit expansion resulting from the simultaneous liberalization of the domestic financial markets and international capital movements has played the most important role in explaining the changes in real economic activity in Finland during the time period analyzed. In fact, over a longer time period (1980-2005) exports to Russia emerge as a countercyclical variable: slightly contractionary after the crazy years, and expansionary during the following depression.

The importance of foreign direct investments in Sumadija and Pomoravlje region

The terms of foreign investment and foreign direct investments are very often terms in foreign economics policy because they represent one of the key issues in foreign economics and practice. The relationship between investments and economic growth is the key question in the modern economic theory. Foreign direct investments are representing the most common shape of international capital movement wich are including the long term connections between more differents countries, regions. The Sumadija and Pomoravlje Region is located in the central Part of Serbia. This Region is the heart of Serbia. Economic development of this part of Serbia is important for the economic development of the whole Serbia as a country. It is very important for the longrange economic growth to define strategy for economic growth for the region of Sumadija and Pomoravlje. In this strategy we will determine the most important tasks and objectives of economic growth also the incentives in the ten year period to come. In the transition country which is Serbia with huge regional and economical problems, without its own funds it is important to attract foreign investment, first of all direct investment. Foreign direct investment which are the basics of all investments in Serbia especially in Shumadija and Pomoravlje region.

Capital Account Policy in South Korea: The Informal Residues of the Developmental State

This paper analyzes the political dynamics of capital account policy in South Korea. The first part is devoted to the historical evolution of capital account policy from the 1960s to the present day. It highlights the path of substantial financial opening that began in the early 1990s with two distinct waves of capital account liberalization before and after the Asian financial crisis of 1997-1998. The second part of the paper aims to detect the political origins of why capital account liberalization has not been complete and sustained. It locates them at the level of domestic informal institutions: first, the ideational legacy of the previous developmental state model - economic nationalism - that was predicated upon substantial barriers to international capital movements. Second, the political power of the export-oriented sector, namely of large conglomerates, that prefer exchange-rate stability and thus restrictions on capital inflows. This paper offers a heuristic argument based on a single case study which needs to be subjected to further empirical testing.

Financial integration and exchange rate determination: a Brazilian case study

This paper investigates the impact on exchange rate determination of two recent changes in developing and emerging countries’ financial integration: first, the rising volume and heterogeneity of short-term portfolio flows; second, foreign investors’ increased exposure to domestic rather than foreign currency assets. In its analysis of Brazil, the paper shows that both changes have potentially destabilizing implications for the exchange rate and may create the risk of self-feeding bubble dynamics leading to large and sudden swings in exchange rates. The results have important implications for the regulation of international capital movements and choice of exchange rate regime.

What Does the Exchange Rate Do? A Status Symbol?

This paper aims to assess the harmful impacts of exchange rate depreciations on Pakistan’s economy, including impacts on international capital movements, wages, the domestic price level, and development. Devaluation of a currency in terms of foreign currencies or metallic standards was for long considered to be undesirable and, if unavoidable, a sign of failure. Attitudes have since changed and devaluation is thought to bring advantages, especially by making economies more competitive exporters. This paper is intended to show that it has disadvantages that outweigh any supposed advantages, notably its effects on inflation, income distribution, service on foreign debt and incentives. It does so by describing in concrete terms the relations between foreign and domestic prices and the costs of untradeable goods and services that are components of the price of any good in any domestic price index. It also discusses the motives, official and unofficial, that have prompted the monetary authorities of Pakistan to make a practice of regular depreciation of the rupee and to question their justification.

Is Inflation Targeting Still on Target? The Recent Experience of Latin America

This paper reviews the recent experience of a half-dozen Latin American inflation targeting (IT) nations. Repeated and large deviations from the standard IT framework are documented: exchange market interventions have been lasting and widespread; the real exchange rate has often become a target of policy, though this target is seldom made explicit; a range of other non-conventional policy tools, especially changes in reserve requirements but occasionally taxes or restrictions on international capital movements, also came into common use. As in developed nations, during the 2008-2009 crisis issues of liquidity provision took center stage. A first evaluation of the emerging modified framework of monetary policy is also attempted. In general terms, the new approach seems to have been effective, at the very least since the region weathered the crisis reasonably well. But also, and perhaps more importantly, many questions remain about the desirability of non-conventional monetary policies in Latin America.

MANAGEMENT OF FOREIGN DIRECT INVESTMENT IN TERMS OF ITS REGIONAL LOCALIZATION IN SLOVAKIA

The phenomenon of globalization had resulted in strengthening of the international capital movement in the 1990s, which led to an intensive retraction of small and open economies into the globalization process. The foreign direct investment (FDI) has since gained its importance, especially in the area of local and regional development. Its positive impact is reflected at the local, as well as at the national level. FDI is the means of ensuring technology transfer, increasing employment, as well as improving the quality of the workforce.The aim of this article is to assess the stock of foreign direct investment and its localization in the Slovak regions at NUTS III level. From the content perspective, the article analyzes the economic development of the Slovak region by region, based on the stock of FDI, by using models from neoclassical theory of regional development for the period from 1999 to 2009. We assumed that the different regional stock of foreign direct investment would have a significant impact on the economic differentiation of the regions in the Slovak Republic. This analysis confirmed our assumption.