Demir, Firat (2007): Volatility of short term capital flows and socio-political instability in developing countries: A review.
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The paper reviews the theoretical and empirical evidence on the relationship between financial liberalization and socio-political risk by identifying the inter-dependent nature of socio-political and economic fault lines. In particular, the research examines the dynamic relationship between the volatility of short-term capital flows and socio-political instability. Accordingly, the socio-political risk is argued to be endogenously determined with the volatility of short term capital inflows such that increasing volatility by disrupting market activities, domestic investment and growth increases socio-political risk, which further feeds into the volatility of such flows. Using evidence from three major developing countries that are Argentina, Mexico and Turkey and applying Granger causality tests and Impulse Response Functions, the paper finds support for the presence of an endogenous relationship between the volatility of short-term capital inflows and socio-political instability. The results challenge the previous research regarding the use of political risk as a purely exogenous variable.
|Item Type:||MPRA Paper|
|Institution:||University of Oklahoma|
|Original Title:||Volatility of short term capital flows and socio-political instability in developing countries: A review|
|Keywords:||Short Term Capital Flow Volatility, Socio-Political Instability, Developing Countries|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries
|Depositing User:||Firat Demir|
|Date Deposited:||22. Jan 2008 16:20|
|Last Modified:||16. Mar 2013 00:33|
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Volatility of short term capital flows and socio-political instability in Argentina, Mexico and Turkey. (deposited 28. Feb 2007)
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