The Evidence and Impact of Financial Globalization

Chapter 7

Composition of International Capital FlowsA Survey

K. Kirabaeva* and A. Razin^{†, ‡}

^*International Monetary Fund, Washington, DC, USA

^†Cornell University, Ithaca, NY, USA

^‡Tel Aviv University, Tel aviv, Israel

Outline

What the Chapter Is About

Introduction

Home-Court Information Advantage

Pecking Order of Capital Flows

Foreign debt investment

Foreign portfolio investment

Foreign direct investment

Debt Flows

Bank Loans and Banking Crises

Capital Flow Reversals

Equity Flows and Liquidity Shocks

Information–Liquidity Trade-Off Between FDI and FPI

Composition of Equity Flows and Financial Crises

Moral Hazard in Debt Contracts Under Limited Enforcement

Role of Bonds in the Presence of Home Bias in Goods and Equities

Home Bias in Goods and Equities ...