[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/soa/wpaper/186.html
   My bibliography  Save this paper

Capital Flows to Emerging Markets: An alternative Theoretical Framework

Author

Listed:
  • Bruno Bonizzi

    (Department of Economics, SOAS University of London, UK)

Abstract
This paper represents a theoretical contribution to the analysis of international capital flows. It outlines an alternative theoretical framework based on Post-Keynesian monetary theory, and in particular on Hyman Minsky’s Wall Street paradigm and concept of Money-manager capitalism and Jan Toporowski’s theory of capital market inflation. The key aspects of such an approach are, firstly, that in a monetary analysis capital flows need to be understood as “flows of funds†, as opposed to the traditional understanding of capital flows based on “real†decision, such as saving and investment. A consequence of this is the need of focusing on gross rather than net capital flows. Secondly, when considering emerging markets, the asymmetric nature of the international monetary system must be stressed. Thirdly, it is important to understand the specific forms that capital flows take: in today’s world, pension funds and other institutional investors — alongside banks — are key players in the financial markets, and their role in shaping capital flows to emerging markets must be explicitly recognised. This paper synthesises these elements by understanding capital flows as the result of institutional investors portfolio choice. Along the lines of Minsky and Toporowski, portfolio choice by institutional investors need to be assessed in relation to their balance sheet structure, beside risk/return trade-offs and general state of risk aversion

Suggested Citation

  • Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers 186, Department of Economics, SOAS University of London, UK.
    • Handle: RePEc:soa:wpaper:186
    as

    Download full text from publisher

    File URL: https://www.soas.ac.uk/sites/default/files/2022-10/economics-wp186.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Giancarlo Bertocco, 2005. "The Role of credit in a Keynesian monetary economy," Review of Political Economy, Taylor & Francis Journals, vol. 17(4), pages 489-511.
    2. Dimitri Papadimitriou & L. Randall Wray, 1998. "The Economic Contributions of Hyman Minsky: varieties of capitalism and institutional reform," Review of Political Economy, Taylor & Francis Journals, vol. 10(2), pages 199-225.
    3. Dani Rodrik & Arvind Subramanian, 2009. "Why Did Financial Globalization Disappoint?," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 112-138, April.
    4. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    5. repec:bla:intfin:v:5:y:2002:i:3:p:401-36 is not listed on IDEAS
    6. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "International Financial Adjustment," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 665-703, August.
    7. Ashoka Mody & Mark P. Taylor, 2013. "International capital crunches: the time-varying role of informational asymmetries," Applied Economics, Taylor & Francis Journals, vol. 45(20), pages 2961-2973, July.
    8. Maurice Obstfeld, 2009. "International Finance and Growth in Developing Countries: What Have We Learned?," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 63-111, April.
    9. Jan Toporowski, 2012. "The Monetary Theory of Kalecki and Minsky," Working Papers 172, Department of Economics, SOAS University of London, UK.
    10. Lavoie, Marc, 1996. "Horizontalism, Structuralism, Liquidity Preference and the Principle of Increasing Risk," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 275-300, August.
    11. Philip Arestis, 2002. "Financial crisis in Southeast Asia: dispelling illusion the Minskyan way," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(2), pages 237-260, March.
    12. Jan Toporowski, 2010. "A Theory of Capital Rationing," Working Papers 166, Department of Economics, SOAS University of London, UK.
    13. Jan Toporowski, 2000. "Monetary Policy in an Era of Capital Market Inflation," Macroeconomics 0004026, University Library of Munich, Germany.
    14. Manmohan S. Kumar & Avinash Persaud, 2002. "Pure Contagion and Investors’ Shifting Risk Appetite: Analytical Issues and Empirical Evidence," International Finance, Wiley Blackwell, vol. 5(3), pages 401-436, November.
    15. Giuseppe Fontana, 2000. "Post Keynesians and Circuitists on Money and Uncertainty: An Attempt at Generality," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(1), pages 27-48, September.
    16. Hyman P. Minsky & Charles J. Whalen, 1996. "Economic Insecurity and the Institutional Prerequisites for Successful Capitalism," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(2), pages 155-170, December.
    17. Claudio H. Dos Santos, 2006. "Keynesian theorising during hard times: stock-flow consistent models as an unexplored 'frontier' of Keynesian macroeconomics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(4), pages 541-565, July.
    18. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    19. Giancarlo Bertocco, 2007. "The characteristics of a monetary economy: a Keynes--Schumpeter approach," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(1), pages 101-122, January.
    20. Brunnermeier, Markus & De Gregorio, José & Eichengreen, Barry & El-Erian, Mohamed & Fraga, Arminio & Ito, Takatoshi & Lane, Philip R. & Pisani-Ferry, Jean & Prasad, Eswar & Rajan, Raghuram & Ramos, Ma, 2012. "Banks and cross-border capital flows: challenges and regulatory responses," LSE Research Online Documents on Economics 102439, London School of Economics and Political Science, LSE Library.
    21. Gian M Milesi-Ferretti & Olivier J Blanchard, 2009. "Global Imbalances; In Midstream?," IMF Staff Position Notes 2009/29, International Monetary Fund.
    22. Korkut Erturk, 2005. "Speculation, Liquidity Preference and Monetary Circulation," Working Paper Series, Department of Economics, University of Utah 2005_12, University of Utah, Department of Economics.
    23. Bernd Braasch, 2010. "Financial market crisis and financial market channel," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 45(2), pages 96-105, March.
    24. Mark Setterfield (ed.), 2006. "Complexity, Endogenous Money and Macroeconomic Theory," Books, Edward Elgar Publishing, number 3552.
    25. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    26. Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
    27. Devereux, Michael B. & Sutherland, Alan, 2010. "Valuation effects and the dynamics of net external assets," Journal of International Economics, Elsevier, vol. 80(1), pages 129-143, January.
    28. Taylor, Mark P & Sarno, Lucio, 1997. "Capital Flows to Developing Countries: Long- and Short-Term Determinants," The World Bank Economic Review, World Bank, vol. 11(3), pages 451-470, September.
    29. Giuseppe Fontana, 2002. "Some notes on the monetary debate within the Post Keynesian school," Chapters, in: Shelia C. Dow & John Hillard (ed.), Post Keynesian Econometrics, Microeconomics and the Theory of the Firm, chapter 9, Edward Elgar Publishing.
    30. Maurice Obstfeld, 2009. "International Finance and Growth in Developing Countries: What Have We Learned?," NBER Working Papers 14691, National Bureau of Economic Research, Inc.
    31. Dimitri B. Papadimitriou & L. Randall Wray (ed.), 2010. "The Elgar Companion to Hyman Minsky," Books, Edward Elgar Publishing, number 13122.
    32. Ahmed, Shaghil & Zlate, Andrei, 2014. "Capital flows to emerging market economies: A brave new world?," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 221-248.
    33. Obstfeld, Maurice, 2012. "Financial flows, financial crises, and global imbalances," Journal of International Money and Finance, Elsevier, vol. 31(3), pages 469-480.
    34. Jan Toporowski & Jo Michell (ed.), 2012. "Handbook of Critical Issues in Finance," Books, Edward Elgar Publishing, number 14083.
    35. Riccardo Bellofiore & Joseph Halevi & Marco Passarella, 2010. "Minsky in the ‘New’ Capitalism: The New Clothes of the Financial Instability Hypothesis," Chapters, in: Dimitri B. Papadimitriou & L. Randall Wray (ed.), The Elgar Companion to Hyman Minsky, chapter 4, Edward Elgar Publishing.
    36. Lane, Philip & Milesi-Ferretti, Gian Maria, "undated". "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
    37. Jan Toporowski, 2012. "Neologism as Theoretical Innovation in Economics: The case of 'Financialisation'," Working Papers 171, Department of Economics, SOAS University of London, UK.
    38. Louis-Philippe Rochon & Sergio Rossi (ed.), 2003. "Modern Theories of Money," Books, Edward Elgar Publishing, number 2506.
    39. Mr. Gian M Milesi-Ferretti & Mr. Olivier J Blanchard, 2009. "Global Imbalances: In Midstream?," IMF Staff Position Notes 2009/029, International Monetary Fund.
    40. Michael B. Devereux & Alan Sutherland, 2011. "Country Portfolios In Open Economy Macro‐Models," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 337-369, April.
    41. Evans, Martin D.D. & Hnatkovska, Viktoria, 2012. "A method for solving general equilibrium models with incomplete markets and many financial assets," Journal of Economic Dynamics and Control, Elsevier, vol. 36(12), pages 1909-1930.
    42. Mr. Gaston Gelos, 2011. "International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey," IMF Working Papers 2011/092, International Monetary Fund.
    43. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    44. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grzegorz Tchorek & Michał Brzozowski & Paweł Śliwiński, 2017. "Determinants of capital flows to emerging and advanced economies between 1990 and 2011," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(1), pages 17-48, April.
    2. Mirjam Büdenbender & Manuel B. Aalbers, 2019. "How Subordinate Financialization Shapes Urban Development: The Rise and Fall of Warsaw's Służewiec Business District," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 43(4), pages 666-684, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gourinchas, Pierre-Olivier & Rey, Hélène, 2014. "External Adjustment, Global Imbalances, Valuation Effects," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 585-645, Elsevier.
    2. Philip Lane, 2013. "Financial Globalisation and the Crisis," Open Economies Review, Springer, vol. 24(3), pages 555-580, July.
    3. Carolina Alves & Jan Toporowski, 2019. "Growth of international finance and emerging economies: Elements for an alternative approach," PSL Quarterly Review, Economia civile, vol. 72(288), pages 3-26.
    4. Bonizzi, Bruno, 2017. "Institutional investors’ allocation to emerging markets: A panel approach to asset demand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 47-64.
    5. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    6. Koepke, Robin, 2015. "What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature," MPRA Paper 62770, University Library of Munich, Germany.
    7. Bruno Bonizzi & Christina Laskaridis & Jan Toporowski, 2015. "Developing Countries’ External Debt and International Financial Integration," Working papers wpaper121, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    8. Carolina Alves & Vivienne Boufounou & Konstantinos Dellis & Christos Pitelis & Jan Toporowski, 2016. "Synthesis Report; Empirical analysis for new ways of global engagement," Working papers wpaper163, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    9. Nataliia Osina, 2021. "Global governance and gross capital flows dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(3), pages 463-493, August.
    10. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, December.
    11. Grzegorz Tchorek & Michał Brzozowski & Paweł Śliwiński, 2017. "Determinants of capital flows to emerging and advanced economies between 1990 and 2011," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(1), pages 17-48, April.
    12. Yongsung Chang & Sun-Bin Kim & Jaewoo Lee, 2013. "Accounting for Global Dispersion of Current Accounts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 477-496, July.
    13. Broner, Fernando & Didier, Tatiana & Erce, Aitor & Schmukler, Sergio L., 2013. "Gross capital flows: Dynamics and crises," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 113-133.
    14. Rabitsch, Katrin & Stepanchuk, Serhiy & Tsyrennikov, Viktor, 2015. "International portfolios: A comparison of solution methods," Journal of International Economics, Elsevier, vol. 97(2), pages 404-422.
    15. Ghironi, Fabio & Lee, Jaewoo & Rebucci, Alessandro, 2015. "The valuation channel of external adjustment," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 86-114.
    16. Pascal Towbin, 2013. "Financial Integration And External Sustainability," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(4), pages 375-395, October.
    17. Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2010. "Financial Globalization and Economic Policies," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4283-4359, Elsevier.
    18. Bergant, Katharina, 2021. "The role of stock-flow adjustment during the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 110(C).
    19. Chen, Jinzhao & Quang, Thérèse, 2014. "The impact of international financial integration on economic growth: New evidence on threshold effects," Economic Modelling, Elsevier, vol. 42(C), pages 475-489.
    20. Devereux, Michael B. & Sutherland, Alan, 2010. "Valuation effects and the dynamics of net external assets," Journal of International Economics, Elsevier, vol. 80(1), pages 129-143, January.

    More about this item

    Keywords

    Capital flows; Emerging Markets; Flow of Funds; Institutional Investors;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:soa:wpaper:186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chandni Dwarkasing (email available below). General contact details of provider: https://edirc.repec.org/data/desoauk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.