Open Economies Review

, Volume 24, Issue 3, pp 371–396 | Cite as

Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990–2010

Research Article


We investigate the relationship between economic growth and lagged international capital flows, disaggregated into FDI, portfolio investment, equity investment, and short-term debt. We follow about 100 countries during 1990–2010 when emerging markets became more integrated into the international financial system. We look at the relationship both before and after the global crisis. Our study reveals a complex and mixed picture. The relationship between growth and lagged capital flows depends on the type of flows, economic structure, and global growth patterns. We find a large and robust relationship between FDI – both inflows and outflows – and growth. The relationship between growth and equity flows is smaller and less stable. Finally, the relationship between growth and short-term debt is nil before the crisis, and negative during the crisis.


Capital flows Economic growth FDI Portfolio investment Equity investment Short-term debt Financial integration Financial crisis 

JEL codes

F43 F21 F32 



Joshua Aizenman and Yothin Jinjarak acknowledge funding from the Asian Development Bank (ADB). The views herein are entirely those of the authors. They do not necessarily represent the views of the ADB, or the NBER.


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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Joshua Aizenman
    • 1
    • 2
  • Yothin Jinjarak
    • 3
  • Donghyun Park
    • 4
  1. 1.Department of EconomicsUniversity of CaliforniaSanta CruzUSA
  2. 2.NBERCambridgeUSA
  3. 3.University of LondonLondonUK
  4. 4.Economics and Research DepartmentAsian Development BankMandaluyong CityPhilippines

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