Patterns of Capital Flows to Emerging Markets: A Theoretical Perspective

32 Pages Posted: 15 Feb 2006

See all articles by Zhaohui Chen

Zhaohui Chen

International Monetary Fund (IMF)

Mohsin S. Khan

International Monetary Fund (IMF)

Date Written: January 1997

Abstract

This paper reviews some of the basic patterns of international capital flows to emerging markets in recent years, including the composition of capital flows, intraregional flow patterns, and the geographical distribution of the flows. A theoretical model that sheds new light on these observed patterns is developed. This model focuses on the cost of financing aspect of capital flows, and shows that the patterns of capital flows are influenced by the combined effects of financial market development and growth potential in the recipient countries. The theoretical predictions of the model are shown to be consistent with the stylized facts.

Keywords: Capital flows, emerging markets, cost of financing, contract and regulation

JEL Classification: F21, G15, G32

Suggested Citation

Chen, Zhaohui and Khan, Mohsin S., Patterns of Capital Flows to Emerging Markets: A Theoretical Perspective (January 1997). IMF Working Paper No. 97/13, Available at SSRN: https://ssrn.com/abstract=882233

Zhaohui Chen (Contact Author)

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
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202-623-6480 (Phone)
202-623-4740 (Fax)

Mohsin S. Khan

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4518 (Phone)
202-623-6440 (Fax)

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