What is Capital Flight?

This paper offers a definitive distinction between capital flight and capital outflows. It unifies and synthesises the capital flight concept as used in both theoretical and empirical work and shows that various definitions have two common elements. These are: (1) capital flight is a subset of capital outflows from developing countries by its residents; (2) these outflows must be motivated by risks and uncertainties that are peculiar to developing countries. The former points to the counter‐intuitive nature of these outflows. The latter gives these counterintuitive outflows’ explanation. We then propose an econometric method to measure this concept, and illustrate its use by applying it to Korea.     

Combating capital flight from developing countries

The flight of capital from the highly indebted developing countries undoubtedly constitutes one of the most serious problems that are making the international debt crisis difficult if not impossible to resolve. Dr. Nölling outlines some suggestions for action which could limit capital flight significantly in the short term.     

The returns to training in Russia: a difference‐in‐differences analysis

The experience of developed countries – particularly member‐states of the OECD – has shown that employers are actively investing in developing the human capital of their employees. According to research conducted by the World Bank, more than half of the companies in developed countries provide their employees with training in one form or another. There is, however, reason to believe that the situation is quite different in Russia. Some studies have shown that the level of investment in training in Russia is much lower. This difference can be explained by the fact that employers do not see the point in such investment because it is much easier to lure employees with the required qualifications than to train their own staff. Moreover, Russia faces a problem with high employee mobility, meaning that companies are not sure that they will get a return on their investment. Given these circumstances, the present study examines whether investments in human capital in Russia are profitable. It investigates the wage return to job‐related training using a difference‐in‐differences estimator to control for unmeasured differences in ability and measured differences in past wages as a proxy for ability and motivation. Estimates use panel data from The Russia Longitudinal Monitoring Survey – Higher School of Economics from 2004 to 2011. As predicted, positive returns to training are identified and the returns increase absolutely with the level of past wages.     

The feasibility of currency union in Gulf Cooperation Council countries: A business cycle synchronisation view

This paper study the feasibility of a monetary union among Gulf Cooperation Council (GCC) countries, by measuring the evolution of economic integration among them. Considering the critical role of crisis and shocks in the integration process within the region, we determine whether GCC countries are characterised by a common business cycle. We suggest a different empirical approach that, unlike previous studies, allows one to endogenously detect structural changes in the comovement process between outputs. We apply a new measure for this region that is based on the time‐varying coherence function. Such a measure not only detects comovement dynamics but also distinguishes these dynamics in terms of short‐ and long‐term cycles. Additionally, we can test whether certain countries tend to be more synchronised. The main finding of this study is that not all GCC countries share a common short‐term business cycle. However, in the long term, all country‐pairs indicate a medium‐level synchronisation in the most recent subperiods. The new role of the United Arab Emirates’ regional trade platform allows it to strengthen long‐term business cycle comovement, thus differentiating it from other GCC country‐pairs that have shown a decline in the last two subperiods.     

How does capital control spur economic growth?

This paper provides a conceptual and empirical framework for evaluating the effect of capital controls on long‐term economic growth. In a small open economy which relies on successful investment projects to provide capital goods, taking out short‐term loans has two contradictory impacts: (i) it reduces the interest costs of financing investment projects; and (ii) it also leads to larger asset losses in the scenario of short‐term debt run. In this work, we hypothesise that private financing decisions made by domestic investors are distorted towards excessive risk‐taking, leading to ineffective capital formation. Thus, capital control policies, particularly regulations on short‐term loans, can be socially beneficial as they alter the debt composition, promote capital formation and achieve a higher output level. Using a panel data set covering 77 countries from 1995 to 2009, we employ a system generalised method of moments (GMM) estimator to sequentially test three hypotheses and find strong empirical evidence that supports our theory.     

Dealing with financial crises in emerging markets

Financial crises in emerging markets are a reality of doing business in these countries in the early twenty‐first century. Managers can gain some perspective on this problem from experiences of firms in crises that occurred in Mexico, Thailand, and Russia during the 1990s. We show how firms have taken steps to protect themselves against financial crises and to deal with the crises once underway in these three countries. Such strategies are divided into frameworks of: short‐term, immediate responses to a crisis; intermediate steps during the period of economic downturn; and long‐term continuing responses for operating in emerging markets. © 2002 Wiley Periodicals, Inc.     

The Relationship between Political Tensions,Trade and Capital Flows in ASEAN Plus Three

We estimate the effects of political tension on trade and capital flows in ASEAN Plus Three countries in the framework of a gravity model. We quantify political tension through text‐parsing software reading daily Reuters’ articles from 1990 to 2013 and exclude Brunei and Laos due to sparsity of news coverage. Regarding bilateral trade, we find that political conflict, measured by negative reports in Reuters’ articles, seems to only affect bilateral trade between countries that are not both members of the World Trade Organization (WTO). For these countries, a 1 per cent rise in the tension score results in a 0.05 per cent decline in trade. There is weaker evidence that improvement in bilateral relationship, measured by positive reports in Reuters’ articles, is associated with more trade. As for capital flows, while long‐term capital flows, measured by foreign direct investment, appear to be unaffected by short‐term tensions, both a non‐democratic government and a history of war negatively affect FDI.     

The Aftermath of a Currency Collapse: How Different are Emerging Markets?

In currency crises, unlike in orderly devaluations, the financial markets dominate events. Previous research has shown that the output effects of a crisis tend to be worse in emerging markets, and the current account adjustment greater. This paper examines the evolution of a wider range of macroeconomic variables from two years before a currency collapse to two years afterwards. On the basis of twelve recent episodes, it is shown that currency collapses (crises followed by depreciations) have had a much greater adverse impact in emerging markets (defined as relatively high‐income developing countries exposed to international capital markets) than in developed countries. There is greater nominal and real depreciation, a substantial inflation shock, a much bigger output effect, and far greater import compression, whilst inflows of portfolio capital virtually cease. These differences are statistically significant. Nevertheless there is wide variation n the post‐collapse experience of the six emerging markets studied (Mexico, Thailand, Korea, Indonesia, Russia and Brazil). Although all six experienced a sudden stop or even a reversal of capital flows and very sharp nominal depreciations, inflation remained low in Thailand, Korea and Brazil, and output losses were comparatively small in Russia and Brazil. Previous studies of individual crises suggest that important factors are the state of the banking system and its vulnerability to currency movements, the ability of the authorities to establish a credible macroeconomic policy after the collapse, and whether the crisis triggers significant political instability.     

Capital Flight and Bitcoin Regulation

This paper studies the risk of Bitcoin being used for the purpose of capital flight. We propose a new indicator, the bitcoin‐implied exchange rate discount, to identify empirically capital flight via Bitcoin. Using data from the two largest bitcoin exchanges in the world during our sample period, BTC China and Bitstamp, we find strong evidence of capital flight from the Chinese Renminbi to the US Dollar via Bitcoin before the People's Bank of China, China's central bank, announced its regulatory policy on December 5, 2013, while the evidence displays no trace of capital flight after the announcement. The People's Bank of China's Bitcoin restriction policy successfully halts the illicit capital outflow via Bitcoin, thereby providing valuable policy implications for government regulation on Bitcoin, as well as on other virtual currencies.     

The anatomy of financial crises: Evidence from the emerging ADR market

We study the anatomy of recent financial crises in Mexico, East Asia, Russia, Brazil, Turkey, and Argentina by investigating the efficiency and pricing of the emerging American depositary receipt (ADR) market. We use a non-parametric technique to test for persistent regime shifts in two basic structural relationships for ADR returns in 20 emerging countries — identified via arbitrage and capital mobility considerations — that should always hold in efficient and integrated capital markets. We find that those “normal” market conditions were instead often violated in proximity of financial crises: The law of one price often weakened (by 54% on average) and domestic sources of risk became more important (often by more than 100%) for many emerging ADRs. We also find the likelihood of these regime shifts to be related to proxies for uncertainty among investors, exchange rate volatility, trade linkages, and liquidity (but not stock market trends, currency devaluations, capital flight, or capital controls).     

MACROECONOMIC ADJUSTMENT UNDER AN EXTERNAL AND FISCAL CONSTRAINT: A FIX‐PRICE/FLEX‐PRICE APPROACH

This paper presents a dual economy model of the fix‐price/flex‐price kind that explicitly allows for the existence of a government budget constraint in a fully open economy. Both the external and fiscal closures resemble very much the contemporary experience of several Latin American countries, where fiscal discipline and fix exchange rate systems have been the norm. Thus, within the public sector, it is assumed that public investment is the adjustment variable, while foreign reserves variation adjusts the external balance. Short‐run impacts of policy‐induced variables and changes in exogenous external financing are analysed. Relevant trade‐offs, especially between output and inflation, follow from an analysis in which the time perspective is rather short. However, in the medium term, some balancing forces in the economy can moderate the trade‐offs. We show among a wide range of events and policy options that this is the case of debt relief or a concerted lending strategy.     

Costly Ties: Social Capital as a Retardant of Network‐Level Entrepreneurial Orientation

Challenging social capital research, we argue that network top management teams (TMTs) established to support entrepreneurship in strategic multipartner networks should be careful in developing ties to outside organizations and networks. We suggest that such ties limit the network TMT's ability to engage in the strategy‐making processes needed to facilitate entrepreneurial orientation on a network level. Based on five‐year panel data from 53 formalized networks of small and medium‐sized enterprises, we demonstrate that homogenous and highly educated network TMTs can compensate the negative effects of TMT ties to other organizations, but not the negative effects of interlocking directorates.     

The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements

Of a total of 2,976 double tax agreements (DTA s), some 60% are signed between a developing and a developed economy. As DTA s shift taxing rights from capital‐importing to capital‐exporting countries, the latter inherently benefit more from the agreements. In this paper, we argue that capital exporters use foreign aid to incite capital importers into signing DTA s. We demonstrate in a theoretical model that in a deal, one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA , this requires compensation from the capital‐exporting country to the capital‐importing country. Examining DTA s that are signed between donor and recipient countries between 1991 and 2012, and using a fixed effects Poisson model, we find that bilateral foreign aid commitments increase by 22% in the year of the signature of a DTA . Evaluated at the sample mean, this translates into around US$ six million additional aid commitments in a DTA signatory year.     

The anatomy of financial crises: Evidence from the emerging ADR market

We study the anatomy of recent financial crises in Mexico, East Asia, Russia, Brazil, Turkey, and Argentina by investigating the efficiency and pricing of the emerging American depositary receipt (ADR) market. We use a non-parametric technique to test for persistent regime shifts in two basic structural relationships for ADR returns in 20 emerging countries — identified via arbitrage and capital mobility considerations — that should always hold in efficient and integrated capital markets. We find that those “normal” market conditions were instead often violated in proximity of financial crises: The law of one price often weakened (by 54% on average) and domestic sources of risk became more important (often by more than 100%) for many emerging ADRs. We also find the likelihood of these regime shifts to be related to proxies for uncertainty among investors, exchange rate volatility, trade linkages, and liquidity (but not stock market trends, currency devaluations, capital flight, or capital controls).     

俄罗斯与东北亚国家能源合作的前景分析

在当今世界经济发展的大趋势下,能源出口在俄罗斯对外贸易中的地位日益加强。同时,它也是俄寻求加入东北亚各国经济进程的有力工具。而俄罗斯与在世界经济发展中居领先地位的东北亚国家的能源合作,也符合这些国家能源进口多元化的战略。由于不同的历史渊源,俄罗斯在中、日、韩这三个东北亚主要国家能源战略中的作用也不尽相同。     

The financial determinants of corporate cash holdings: Evidence from some emerging markets

This paper investigates corporate cash holdings in developing countries. In particular, we look into the effect of capital structure and dividend policy on cash holdings in Brazil, Russia, India, and China and compare our results with a control sample from the US and the UK. Our sample contains 1992 firms across these countries for the period 2002–2008. We employ Instrumental Variables analysis to control for the endogeneity of the financial policies (cash holdings, capital structure, and dividend policy). Our results show some evidence that capital structure and dividend policy affect cash holdings. There are similarities between developed and developing countries on the factors determining corporate cash holdings. The results of our cross-country model provide evidence that capital structure, dividend policy, and firm size are important factors in determining cash holdings. Finally, we show that firms operating in countries with low shareholder protection hold more cash.     

论多元化战略与资本结构

从战略视角思考资本结构问题,不仅可以解释不同国家间企业资本结构的“空间”差异,还可以解释同一国家不同历史时期企业资本结构的“时间”差异。从内部资本市场效应、代理成本效应、交易成本效应和多市场联系效应等四个角度分析多元战略对资本结构的影响,并探讨企业在资本结构决策中如何考虑多元化战略因素。     

The IMF After the Asian Crisis: Merits and Limitations of the ‘Long‐term Development Partner’ Role

We examine the view, espoused by a number of commentators in recent months, that the International Monetary Fund (IMF) should seek to withdraw from its long‐term lending operations, in the wake of the recent financial crisis in Asia and elsewhere, and restrict itself to its ‘core competency’ of preventing and where necessary lending into financial crisis. This view is based on a belief that such long‐term lending crowds out both private sector operations and short‐term IMF lending; and that it is ineffective, because of weaknesses in the IMF’s conditionality. Both of these propositions, we argue, can be challenged. In the poorer developing countries there is virtually no private sector to crowd out, and Enhanced Structural Adjustment Facility (ESAF) operations have been conspicuously successful, not only at promoting growth, but also at achieving structural changes not at all achieved by aid donors such as strengthening the tax base. Such changes inevitably require a longer time‐period than the standard three years of an IMF standby, not only in order to induce a production response but also in order to achieve the necessary measure of stabilisation and economic reform without imposing social pressures which wreck the production response. The latter argument is particularly powerful in middle income countries, and provides an argument for IMF support to these countries also whilst they are temporarily excluded from international capital markets. Often also a long‐term presence is needed to achieve effective leverage in short‐term operations. In such cases the IMF’s long‐term lending should be seen as preconditional to the success of, and not as an alternative to, its short‐term operations. We therefore argue for the retention of the Fund’s long‐term lending function; and for this function not to be transferred to the World Bank, which has less credibility in global financial markets and less comparative advantage in macro‐economic management. Measures are indeed needed to reduce the level of the IMF’s exposure to risk in poorer developing countries, but those, we believe, should consist of the preventive measures currently going on, and measures to increase the ratio of equity to debt, rather than measures which would jeopardise the progress in long‐term poverty alleviation capacity achieved by the Fund over recent years     

On the Link Between Exchange‐rate Regimes,Capital Controls and Monetary Policy Autonomy in Small European Countries, 1979–2000

We investigate international monetary‐policy transmission under different exchange‐rate and capital‐account regimes in eleven small, open economies during the 1980s and 1990s. We find no systematic link between ex‐post monetary‐policy autonomy and exchange‐rate regimes. Capital controls appear to have provided a degree of temporal insulation from foreign monetary policy shocks, though not strict autonomy. The results are consistent both with short‐term autonomy for small countries even under fixed exchange rates and an open capital account, and with long‐term dependence under flexible exchange rates and an independent stability target. Results also indicate that euro‐area market interest rates are significantly more responsive to the development of the corresponding US rate than were the previous national rates.     

Women's Perceived Empowerment in Entrepreneurial Efforts: The Role of Bricolage and Psychological Capital

Women's entrepreneurial empowerment—perceived competence, self‐determination, and ability in managing a firm as an entrepreneur—is important to women's entrepreneurship in developing countries. Drawing on a sample of 369 women entrepreneurs from small and medium enterprises (SMEs) located in Gujarat, a western state in India, we find that women's entrepreneurial empowerment is positively associated with firm revenues. Gains from empowerment could be further enhanced for women entrepreneurs managing resource constraints—through bricolage—and meeting the challenges of self‐employment—through psychological capital. The present study contributes to literature on women's entrepreneurial empowerment and SME performance. Women's empowerment and the bolstering effects of bricolage and psychological capital could help government agencies and non‐government organizations devise programs and policies to improve the performance of women‐owned SMEs in developing countries.