Drivers of Gross Capital Inflows : Which Factors Are More Important for Sub-Saharan Africa?
This paper discusses recent trends and investigates the drivers of capital flows across regions in the world, with emphasis on Sub-Saharan Africa. The post-global financial crisis behavior of capital flows into Sub-Saharan Africa is unique and diff...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/829871552395170556/Drivers-of-Gross-Capital-Inflows-Which-Factors-Are-More-Important-for-Sub-Saharan-Africa http://hdl.handle.net/10986/31403 |
| Summary: | This paper discusses recent trends and
investigates the drivers of capital flows across regions in
the world, with emphasis on Sub-Saharan Africa. The
post-global financial crisis behavior of capital flows into
Sub-Saharan Africa is unique and differs from that of global
capital flows. The structure of financial flows into
Sub-Saharan Africa has shifted toward new sources, such as
international bond issuances and debt inflows from non–Paris
Club governments. The main message is that the behavior of
capital flows into Sub-Saharan Africa differs from that of
capital flows into global, industrial, and non–Sub-Saharan
African developing countries. The regression analysis
reveals that gross flows into Sub-Saharan African are
predominantly influenced by external factors, such as
foreign growth and uncertainty in global markets and
policies. Capital flow behavior for Sub-Saharan African
countries is different from that of industrial countries due
to different economic structures, which render different
transmission processes. The main findings suggest that pull
and push factors are the driving forces of capital inflows
for industrial countries and non–Sub-Saharan African
developing countries—especially better economic performance,
sound fiscal outcomes, a greater degree of financial
openness, and stronger institutions. The impact of these
drivers has become stronger in the 2000s. Macroeconomic
policy can play an important role in attracting capital
inflows. For instance, fiscal discipline promotes greater
other investment inflows, and less flexible exchange rate
arrangements (more exchange rate stability) foster portfolio
investment inflows. |
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