NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Capital Flows in a Globalized World: The Role of Policies and Institutions

Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych

NBER Working Paper No. 11696*
Issued in October 2005
NBER Program(s):   IFM

We describe the patterns of international capital flows in the period 1970 - 2000. We then examine the determinants of capital flows and capital flows volatility during this period. We find that institutional quality is an important determinant of capital flows. Historical determinants of current legal institutions have a direct effect on foreign investments. Policy plays a significant role in explaining the changes in the level of capital flows over time and their volatility.

*Published: This paper was subsequently published as Capital Flows in a Globalized World: The Role of Policies and Institutions, Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych, in NBER book Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences (2007)

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