ANALYSIS OF CAPITAL FLOWS: A CROSS-COUNTRY STUDY

Amit Kumar, Gagan Swamy
2017 International Journal of Management and Social Science Research Review   unpublished
The present paper tries to find out the factors affecting Net capital flow in top 40 countries in terms of net capital flow (UNCTAD 2014). We have used panel data for our analysis. We found that market capitalization positively and significantly affects net inflow of FII's to a particular country. Interest rate also positively and significantly affects net capital flows. So our analysis supports validity of Mundell-Fleming model. Inflation negatively affects Net capital flows as real return on
more » ... ssets get reduce because of inflation. Increase in the GDP growth positively and significantly affects net inflow of total capital. Individuals, firms and corporates invest more in a country where there is potential of increase in growth and expansion of market. So, if there is increase in GDP growth rate it attracts total foreign capital. Our result suggests that whenever there is increase in the GDP growth rate of USA then there is no effect of total capital flow. But whenever here is increase in the GDP growth rate of EU countries then there is net inflow of foreign capital.
fatcat:it2wls4eabdrrjmkbj4zxlnsz4