Movement Of Capital Flows Research Articles

Capital Flow Management Within Macroeconomics Stability Framework in Indonesia (2008 – 2022)

Indonesia is an EMDEs (Emerging Market and Developing Economies) country, and adopting an open economy causes foreign capital flow, especially FDI (Foreign Direct Investment) and PI (Portfolio Investment) can be free flows, and its movements are unpredictable. The movement of capital flows will affect the money supply transmitted to monetary and macroeconomic variables. This study aims to determine the response and contribution of macroeconomic variables to FDI and PI, as well as examining the causality between macroeconomic variables, FDI and PI. This research used the Vector Error Correction Model Granger Causality. The results show that exchange rate and inflation shocks significantly impact FDI and PI. While the results of Granger causality, changes in macroeconomic variables cause changes in FDI and PI. This research recommends that stakeholders continue implementing policy mix and monetary policy to improve exchange rates and inflation stability. In addition, the management of capital flows is still considered because the potential risks posed to the economy are quite large

International labor market in the conditions globalization and digitalization: trends and perspectives

The article examines the essence of the international labor market and emphasizes that the international labor market in the context of the development of the modern information and communication paradigm is at the stage of changing the structure, demand and supply of human capital. It is noted that the development and deepening of the international division of labor, the strengthening of the innovative component of modern international business directly affect the functioning of the international labor market. The movement of goods, services, capital, and information flows leads to the movement of human capital, as well as to the growth of labor migration. World economic theories regarding the functioning of the international labor market are considered. At the same time, it is noted that there is no unified view on the definition of the international labor market and measures to improve it. It was concluded that when interpreting the definition of «international labor market», it is necessary to take into account the peculiarities and specifics of human resources, as well as the emergence of new forms and types of employment in the conditions of globalization and digitalization of the world economic space. An analysis of economic concepts and theories regarding the need for state intervention in employment and migration processes has been carried out. The key factors influencing the functioning and development of the international labor market are analyzed. It was noted that the development of information and communication technologies caused the creation of new forms and types of employment, increased flexibility and mobility of labor resources. The processes of globalization and digitalization contribute to the strengthening of the openness of national labor markets and the creation of barrier-free movement of labor resources. The impact of digitization of all spheres of economic life on the growth of leading international companies' demand for intelligent and qualified personnel, who are ready to experiment, make creative, innovative decisions and learn throughout their lives, was also investigated. Acute issues related to the departure of highly qualified personnel from countries with a low level of economic development to countries with a high level of economic development are analyzed. It is noted that this situation leads to the washing away of labor potential in human capital exporting countries, a decrease in economic and social labor standards, as well as a decrease in financial reserves for the formation of the budget of the labor donor country. The influence of the demographic factor on the development of the international labor market is considered. It was concluded that the structure and number of labor resources by region of the world is quite varied. It was determined that in countries with a high level of economic development, there are trends to a decrease in the birth rate, as well as to an increase in indicators: life expectancy, quality of life, the share of labor migrants in the total number of working population. It is noted that in the conditions of socio-economic transformations associated with digitalization, structural and sectoral changes are taking place in the world economy, and in particular, in the international labor market.

Вплив деяких зовнішніх чинників на фінансову нестабільність в Україні

Introduction. The nature of Ukraine's economic development over the past thirty years reflects its dependence on global financial and economic cycles. The nature of this dependence lies in the stable interrelationship of the global commodity markets with factors of internal financial stability. One of the important ways to overcome such dependence is a nationally-rooted monetary policy aimed at supporting domestic economic activity and weakening the influence of the external environment on financial stability. Problem Statement. Increasing the internal financial stability of the national economy and the regulatory potential of monetary policy by limiting their dependence on global economic cycles. Purpose: Formalization of the relationship between the financial stability of the national economy and changes in the global commodity markets and the identification of prospective monetary policy measures to mitigate them. Methods. General scientific and special methods are used : theoretical generalization, systematic, abstract-logical and comparative analysis, synthesis, grouping. Results. The article summarizes the regularities that determine the cyclical repetition of financial and economic crises in Ukraine. In particular, it was noted that the stability of small open economies, a significant share of whose income is formed by the export of raw materials, largely depends on the situation on the global raw materials markets. Cyclical downturns in these markets cause financial crises, which lead to the decapitalization of small open economies and thus make their structural innovative development impossible. Conclusions. In order to ensure the sustainable development of small open raw material economies, it is necessary to carry out an appropriate institutional policy of the state aimed at ensuring the development of a more complex economic base with a departure from raw material dependence. This requires a corresponding modernization of monetary policy in terms of expanding control over the movement of capital flows, limiting the volatility of the exchange rate.

Dampening Global Financial Shocks: Can Macroprudential Regulation Help (More than Capital Controls)?

AbstractWe show that macroprudential regulation significantly dampens the impact of global financial shocks on emerging markets. Specifically, a tighter level of regulation reduces the sensitivity of GDP growth to capital flow shocks and movements in the Chicago Board Options Exchange's VIX. A broad set of macroprudential tools contributes to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macro‐economic stability. We do not find evidence that capital controls provide similar benefits.

External Factors and Gross Capital Flow movements to India: A VECM Approach

External Factors and Gross Capital Flow movements to India: A VECM Approach

The Time-Varying Effects of Policies: Evidence from Capital Flows to Emerging Markets

We use a novel approach—instrumental variable quantile regression estimates—to analyze expected portfolio inflows to emerging economies. We consider country-specific conditions and the effectiveness of policy interventions when economies are faced with an adverse international financial shock. This approach allows differentiation between the short- and medium-term impacts. Our results suggest that macroprudential policies and foreign exchange actions may reduce the risks of large capital flow movements following an adverse international shock; however, capital flow management policies such as capital control stringency seem to be ineffective. Besides, there is little evidence that monetary policy and high quality of institutions can immediately protect emerging markets from the risks of international financial shocks. However, institutional quality may effectively dampen the impact of excessive flows in the medium term. These findings emphasize the limitations of previous studies, which focused merely on the short-term horizon.

ПІДВИЩЕННЯ ФІНАНСОВОЇ ВІДКРИТОСТІ УКРАЇНИ НА ШЛЯХУ ДО ЄВРОПЕЙСЬКОЇ ІНТЕГРАЦІЇ

Introduction. The article analyzes the changes in approaches to the small economies financial openness improvement. It takes into account the new challenges of global economic instability and the contradictions of the European integration requirements of financial openness in the conditions of global economic destabilization and highlights possible ways of overcome them. Materials and methods. To disclose the theoretical model of the interconnection between financial openness, financial stability and economic growth has been used system-functional and comparative economic-statistical analysis methods based on World Bank and IMF statistic data. Results and discussion. It is emphasized that there is a trend towards strengthening control over capital flows at the global level and the removal of restrictions on the movement of international capital flows is one of the key requirements for the approximation of regulatory norms in the field of financial sector for countries going to join the EU with the regulatory framework of the latter. Given the current conditions of global uncertainty and the threat of increasing financial instability, the EU's position on the free movement of capital flows at this stage may be significantly revised. Due to the current conditions, the requirement of free movement of capital flows contradicts with a list of requirements for the approximation of the characteristics of the financial sector of the candidate countries and the EU. The need for a capital flow control policy for small open economies wishing to join the EU at this stage is not just only the need of ensuring macroeconomic stability, but also to the convergence criteria of systems, in particular in terms of joining to ERM II and BEPS. Conclusions. In overall case of small open economies, in the context of the implementation of European norms and the approximation of regulatory framework in the financial sector, it is necessary to talk about the feasibility of controlling the international capital flows at the stage of building adequate institutional environment as a support measure for further transition to free exchange rate and capital flows liberalization. As a proposal, it is stated that the elimination of identified contradictions and the transition to the free capital movement in the interests of Ukraine's European integration requires proper development of the country's financial sector and, above all, its institutional environment. The implementation of appropriate practical measures for the institutional provision of financial openness should include a policy of control over the movement of capital flows, which combines the potential of fiscal, monetary and regulatory policies in different segments of financial markets as part of the macroprudential policy.

Analisis Hukum Penggunaan Tenaga Kerja Asing Terhadap Pertumbuhan Ekonomi Di Kota Medan

In line with the movement and development of globalization which encourages the movement of capital flows to all corners of the world, then there is also a fairly large movement of population or labor between countries. This is a factor that the owners of capital certainly need skilled workers who can manage their investment in the destination country. This study aims to analyze and provide the basic concept of implementing the protection of the Manpower Act Number 13 of 2003 for foreign workers in Medan City and to analyze whether the use of foreign workers in Medan City has an effect on economic growth or on the contrary has an impact on economic decline and reduced employment opportunities for local workers in Medan City. This research uses normative and doctrinal research, which is a descriptive qualitative research. The results of this study are that in Law No. 13 of 2003 concerning Manpower, the regulation on the use of foreign workers is contained in Chapter VIII, Article 42 to Article 49. And there is an effect of the use of foreign workers in Medan on the increase in the economy of Medan City

Capital flow waves—or ripples? Extreme capital flow movements since the crisis

Has the occurrence of “extreme capital flow movements”—episodes of sudden surges, stops, flight and retrenchment—changed since the Global Financial Crisis (GFC)? And was the period at the outset of the Covid Crisis any different? This paper addresses these questions by updating and building on the dataset and methodology introduced in Forbes and Warnock (2012) to calculate the occurrence of sharp capital flow movements by foreigners and domestics into and out of individual countries. The results suggest that the occurrence of these extreme capital flow movements has not increased since the GFC, including during the early phases of the Covid Crisis (the first half of 2020). The drivers of these episodes, however, appear to have changed since the GFC. Extreme capital flow movements are less correlated with changes in global risk and more correlated with changes in oil prices. More generally, what used to be large global “waves” in international capital flows have more recently become more idiosyncratic “ripples”.

Caracterización de las metodologías de investigación en finanzas bursátiles en Colombia del 2015 al 2020

El objetivo de este artículo consiste en caracterizar las metodologías de investigación utilizadas por los artículos en finanzas bursátiles entre los años 2015 y 2020 en Colombia, mostrando de dichas metodologías cuáles han sido los enfoques, el alcance, el diseño y los métodos de recolección de información empleados por los autores, todo esto, a través de una revisión de literatura que aplica un enfoque de investigación cualitativo con alcance descriptivo. De manera general, se encuentra que el enfoque de investigación cuantitativo predomina en las investigaciones financieras bursátiles colombianas durante el periodo de estudio; a su vez, este enfoque en la mayoría de las veces se combina con un alcance correlacional o explicativo, con un diseño metodológico longitudinal de corte no experimental o de corte transversal y con métodos de recolección de información basados en indicadores o pruebas estandarizadas.

Do Sounder Banks Make Calmer Waters? The Link between Bank Regulations and Capital Flow Waves

This paper tests if prudential and macroprudential regulations have meaningfully reduced the incidence of capital flow “waves,” that is, of sudden stops and surges of capital flows from abroad. The results support other work documenting changes since 2008 in how global factors affect capital flows but provide mixed evidence on how regulations have affected the incidence of sharp capital flow movements. Regulations that strengthen banks (such as higher capital-asset ratios) meaningfully reduce the incidence of surges, but tighter macroprudential regulations appear to have done little to reduce the incidence of capital flow waves--and are even correlated with an increased risk of sudden stops. This may reflect their limited use to date, or how they interact with different types of capital flows. Macroprudential regulations may have reduced the volume and volatility of bank flows but shifted financial intermediation outside the regulated sector and thereby increased the volatility of debt and equity flows. These reforms could still provide important benefits, however, in terms of building the resilience of banks and thereby mitigating the negative effects of capital flow waves on the broader economy. Even if the waters are not much calmer, the waves should do less damage.

Взаємозв’язок фінансової відкритості та економічного зростання

The article summarizes current approaches to the theoretical substantiation of the effects of financial openness on emerging economies. The empirical data on the verifying financial openness effects, in particular the promotion of capital inflows into emerging economies and their productive development in the context of globalization processes, are analyzed. An attempt has been made to identify the influence of the interest rate factor on the direction of the redistribution of international capital flows. Generalized the patterns of the distribution of capital movement instruments depending on the level of development of financial institutions and signs of the capital flows' strong deformation impact on financial markets with underdeveloped institutional environment. As a result of the analysis, it was found that under the conditions of the new normality, characterized by an increase in the volume of free movement of volatile capital flows, an increase in the level of financial openness, contrary to theoretical provisions, does not directly cause the inflow of foreign capital. At the same time, attracting foreign capital on a free, unregulated basis has a limited impact on economic development and mainly finances only the existing, well-functioning, high-yield markets and industries. Contemporary realities and the approach to the evaluation of foreign direct investment as the most effective and less volatile instruments of attracting foreign capital do not correspond to the current state of things. In today's context, only a small part of the FDI arrive into the real sector, while the bulk of them are localized in high-yield segments of the financial markets and used for tax evasion. The lack of direct dependence of international capital flows on the spread of capital yields and the level of financial openness leads to the conclusion that, in addition to the classical factors, the drivers of foreign capital inflow include positive economic dynamics of the recipient country and presence of high-yield markets. At the same time, signs of sustainable economic growth or recession by themselves encourage capital inflow or outflow from the country. At the same time, the presence of a developed financial sector reduces the risks of instability and increases the investment component of financial openness. These conditions form an inverse relationship between macroeconomic dynamics, the level of development of the institutional environment and the change in the level of real financial openness of the economy.

ОЦІНКА СИСТЕМИ УПРАВЛІННЯ ФІНАНСОВОЮ СТІЙКІСТЮ ПІДПРИЄМСТВА В СУЧАСНИХ УМОВАХ ГОСПОДАРЮВАННЯ

The activity of enterprises in market conditions, increasing competition, the emergence of crisis situations and the growing number of bankruptcies require the provision of traditional methods and techniques of crisis management. For the integrity of the economic system of the enterprise is important to make economic decisions regarding the management of income and expenses, movement of assets, capital and cash flows, management of capital structure and other aspects of its activities. Managing financial stability is one of the most important tasks for business in today's economic environment. In the modern economic literature, much attention is paid to the analysis and management of financial stability, but there is no single methodological approach to the interpretation of the essence of the concept of "financial stability". Under the financial stability of the enterprise is understood the property of the enterprise, which is reflected in the interaction of external and internal factors that affect the achievement of financial balance and ability not only to maintain the proper level for some time, but also to function and develop. Today, one of the main problems of enterprises is the lack of a holistic strategy aimed at ensuring the sustainability of financial and economic activities of the enterprise and sustainable development in the future. The financial problems faced by enterprises are largely identical in their economic essence, and therefore their solution is possible with the help of universal tools and standard measures that form the mechanism for managing the financial stability of the enterprise. This article discusses the importance of financial stability in the activities of enterprises, also describes the main approaches to determining financial stability, in addition, this article contains some recommendations for strengthening and controlling the financial condition of the organization. The enterprise management system is considered, which allows to determine the main and auxiliary goals that characterize the level of its financial stability. As a result of the analysis the main factors influencing these categories of a financial condition of the enterprise have been defined.

The Short and Long Run Effect of Domestic Investment, Foreign Direct Investment and Renewable Energy on Economic Development: Evidence from Cameroon

The purpose of this paper is to examine the short and long-run effect of domestic investment, foreign direct investment and renewable energy on economic development in Cameroon. To achieve this, the study makes use of the Autoregressive Distributed Lag Model and Bound test for co‐integration to establish the short and long‐run relationships. The results show that in the short‐run domestic investment and renewable energy both have a positive and significant effect on economic development while foreign direct investment has a negative but significant effect on economic growth. The long‐run equilibrium shows a significant and positive relationship between domestic investment and foreign direct investment on economic development while population growth rate and renewable energy show a negative relationship with economic growth. Official development aid inflow is found to positively affect economic development. However, this finding is seen to be statistically insignificant. The study therefore recommends that the state should continually encourage domestic savings, grant investment incentives as well as improved infrastructural facilities to spur the investment level and consequently economic development. Furthermore, the government should improve the business environment, set up a facilitating structure for both foreign and domestic investors and free movement of capital flows to attract FDI, which raises economic growth hence development.

Capital Flows at Risk

The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

CAPITAL FLOW WAVES AND ECONOMIC GROWTH: EVIDENCE FROM ADVANCED AND DEVELOPING ECONOMIES

There have been growing concerns that volatile international capital flows could harm macroeconomic conditions in a country, although capital mobility generally promotes efficient resource allocation. To understand the roles of gross capital inflows and outflows, this study examines the effects of extreme capital flow waves on economic growth in 164 developing and advanced economies. The main results show clear differences between them. Growth in advanced countries is insensitive to extreme capital flow waves, but for developing countries, sudden stops and retrenchments (sudden decreases in capital inflows and outflows) hurt growth, while surges (sudden increases in capital inflows) are positively associated with growth. The analysis indicates that developing economies are vulnerable to sharp decreases in both capital inflows and capital outflows. Our findings have policy implications for financial regulators, particularly in developing countries, indicating that they should pay more attention to macroprudential policies related to capital flow management aimed at stabilizing capital flow movements.

Забезпечення економічної стабільності в умовах фінансової відкритості: зміна підходів та висновки для України

The article summarizes theoretical approaches to substantiate the benefits and risks of financial openness as the scientific basis for shaping economic stability policy. Shown the gaps of the neoliberal approach to financial openness as an exogenous factor of economic growth and its contradiction with classical theory. The author identifies the signs of change in the institutional view of leading IFIs at the global level and the formation of a more rational approach to the introduction of financial openness, which includes the implementation of international capital flows control and management policies. Determined the main factors of the formation of conditions for financial instability in the economy under the influence of the consequences of uncontrolled movement of international capital flows and revival of foreign trade. As a result of the comparison of modern views with the classical origins of the theory of free movement of capital and the analysis of empirical data on the practical impact of financial openness on economic stability, it is substantiated that the modern rational approach is more consistent with the classical origins of the theory of financial integration and the practical needs for stable economic growth. Substantiated the influence of the institutional environment of the financial sector on the benefits of financial and trade openness. Based on the need to ensure stable functioning of Ukraine’s economy, the author outlines the conceptualized principles of the rational advancement of Ukraine’s economy towards financial openness.

East Asia–Regional or Global Financial Integration?

The article considers the main directions of further financial integration of East Asian countries, developing deep and stable connections within the framework of global and regional economy. Currently, among the investment flows that lay ground for financial integration with other regions, the leading place is taken by funds from and to the countries of North America and Western Europe. At the same time, the growth in intraregional investment, especially in terms of assets, significantly exceeds growth from the group of developed countries, the share of participation of the latter in interregional relations is gradually decreasing. Through the development of regional integration at various levels of economic interaction, Asian countries are seeking ways to reduce vulnerability and contagion from the processes of financial globalization. While the trends in regional financial integration have certain advantages, they also involve some risks. On the one hand, the Asian region can benefit from greater financial diversification and reduce the concentration and dependence from western economies. On the other hand, this process can bring imported volatility from other countries of the region and reduce the regulatory counteraction from various types of shocks that arise in the economies of these countries and beyond. The intensity of further convergence of the financial markets and institutional arrangements of Asian countries will be largely determined by the scenarios of development of the world economy, as its slowdown and, consequently, decrease of activity in the global capital market clearly leads to strengthening of regional integration processes. The expansion of intraregional cross-border financial transactions requires a significant expansion of the regulatory framework for cooperation, the conclusion of two-and multilateral banking and investment agreements, as they directly determine the process of capital flows liberalization. As regional financial cooperation in Asia has not yet developed as in Western Europe and North America, it is important to pay attention to such essential elements as economic and financial supervision, normative harmonization of banking and securities market, strengthening of regional financial security system and maintenance of development of various segment of financial market, first of all bonds in local currency. In the process of work the basic methods of economic analysis were applied, namely basic system and statistical methods. The use of the system approach allowed to consider the movement of capital flows from an to Asia over a long period of time, the evolution of financial integration models. Calculations and comparisons, the construction of tables was carried out on the basis of statistical methods, which are applied for the study of currency and credit relations. The information base of the studies was based on reports and statistics of the World Bank (IBRD), the International Monetary Fund (IMF), the Asian Development Bank, as well as analytical materials of the Institute of World Economy and International Relations of RAS.

Linkages Between the Foreign Exchange Markets of BRIC Countries—Brazil, Russia, India and China—and the USA

The past decade has witnessed increasing trade and capital flow movements between BRIC countries (Brazil, Russia, India and China) and the USA indicating a need for a better understanding of currency linkages between these countries. This article examines long-run and short-run relationships between foreign exchange markets of BRIC countries and the USA. Long-run results indicate that, over a period beginning January 2000 and ending November 2013, the currency markets of China, India and the USA are tied together, implying that from the perspective of the US investor, the markets of Brazil and Russia provide the greater diversification benefits. Further, the USA is found to be the source of the common trend (CT), suggesting that it leads the three (cointegrated) markets towards the long-run equilibrium relationships. Brazil and India share no short-run lead-lag relationship with the USA. JEL Classification: F31, G15

Capital flow management policies in emerging market economies: Are they successful in mitigating drastic changes of capital flows?

AbstractThis paper constructs a new database for capital flow management policies (CFMs) in 16 emerging market economies from 1999 to 2008 and analyses their effect on extreme capital flow movements. We show that CFMs are effective in mitigating drastic changes of capital flows. We also find that CFMs do not have significant impacts on capital flow volumes. The results suggest that CFMs could be employed as policy toolkits for mitigating extreme capital flow movements without distorting capital flows in a normal period.