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

Joshua Aizenman, Yothin Jinjarak, Donghyun Park

Research output: Contribution to journalArticlepeer-review

105 Scopus citations


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.

Original languageEnglish
Pages (from-to)371-396
Number of pages26
JournalOpen Economies Review
Issue number3
StatePublished - 1 Jul 2013
Externally publishedYes


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

ASJC Scopus subject areas

  • Economics and Econometrics


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