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This paper analyzes the joint behavior of international capital flows by foreign and domestic agents-gross capital flows-over the business cycle and during financial crises. The authors show that gross capital flows are very large and volatile, especially relative to net capital flows. When foreigners invest in a country, domestic agents tend to invest abroad, and vice versa. Gross capital flows are also pro-cyclical, with foreigners investing more in the country and domestic agents investing more abroad during expansions. During crises, especially during severe ones, there is retrenchment, that is, a reduction in both capital inflows by foreigners and capital outflows by domestic agents. This evidence sheds light on the nature of shocks driving capital flows and helps discriminate among existing theories. The findings seem consistent with shocks that affect foreign and domestic agents asymmetrically, such as sovereign risk and asymmetric information.

Capital Flows --- Crises --- Debt Markets --- Domestic investors --- Economic Theory & Research --- Emerging Markets --- Foreign investors --- Gross capital flows --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Net capital flows

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Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.

Domestic Investment --- Economic Theory & Research --- Emerging Markets --- Foreign Investors --- Free Trade --- Investment Policy --- Multinational Firms --- Public Sector Corruption & Anticorruption Measures --- Public Sector Development --- Trade Statistics --- Transport Economics Policy & Planning

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Malawi is among the few countries in sub-Saharan Africa that has witnessed significant improvements in relation to meeting the Millennium Development Goal (MDG) targets. It exhibits some of the main challenges facing African democracies while they attempt to consolidate the benefits of democratisation. Political Transition and Inclusive Development in Malawi critically analyses opportunities and constraints related to the impact of democracy on development in one of the world’s poorest countries. The book explores how, and to what extent, processes related to democratic and economic governance can be strengthened in order to make political and administrative authorities more responsive to development needs. It also considers characteristics of successful implementation of public policy and the effective and timely delivery of basic services in local contexts; increased citizen participation and dialogue with local government authorities; factors that enable civil society organisations to hold political and administrative officials to account; and better utilisation of academic research for improved evidence-based policy formulation and implementation. This volume will be of great interest to scholars in development studies, African studies, politics, law and anthropology, as well as policymakers and those interested in democracy, governance, human rights and the implementation of anti-poverty programmes, development administration and decentralisation.

Democracy --- Economic development --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Self-government --- Political science --- Equality --- Representative government and representation --- Republics --- Malawi --- Politics and government --- Economic conditions. --- Africa --- China --- India --- MDGs --- anti-poverty --- democratisation --- elitism --- foreign investors --- human rights --- investment --- legislative --- media --- oligarchies --- public policy

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Many countries spend significant resources on investment promotion agencies in the hope of attracting inflows of foreign direct investment. Despite the importance of this question for public policy choices, little is known about the effectiveness of investment promotion efforts. This study uses newly collected data on national investment promotion agencies in 109 countries to examine the effects of investment promotion on foreign direct investment inflows. The empirical analysis follows two approaches. First, it tests whether sectors explicitly targeted by investment promotion agencies receive more foreign direct investment in the post-targeting period relative to the pre-targeting period and non-targeted sectors. Second, it examines whether the existence of an investment promotion agency is correlated with higher foreign direct investment inflows. Results from both approaches point to the same conclusion. Investment promotion efforts appear to increase foreign direct investment inflows to developing countries. Moreover, agency characteristics, such as the agency's legal status and reporting structure, affect the effectiveness of investment promotion. There is also evidence of diversion of foreign direct investment due to investment incentives offered by other countries in the same geographic region.

Affiliated organizations --- Debt Markets --- Domestic investment --- Emerging Markets --- Finance and Financial Sector Development --- Foreign Direct Investment --- Foreign direct investment --- Foreign investors --- Income --- International Economics & Trade --- International Investors --- Investment and Investment Climate --- Investment incentives --- Investment Promotion --- Macroeconomics and Economic Growth --- Non Bank Financial Institutions --- Private Sector Development --- Public Disclosure --- Tax rates

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This paper uses issuance-level data to study how equity capital inflows that enter emerging market economies affect equity issuance and corporate investment. It shows that foreign inflows are strongly correlated with country-level issuance. The relation reflects the behavior of large issuers issuing in domestic equity markets and that of firms issuing in international markets. Those larger, more liquid, and highly valued firms are the ones more likely to raise equity when their country receives capital inflows. To identify supply-side shocks, capital inflows into each country are instrumented with exogenous changes in other countries' attractiveness to foreign investors. Shifts in the supply of foreign capital are important drivers of increased equity inflows. Instrumented inflows lead a subset of firms (large domestic issuers and foreign issuers) to raise new equity, which they use to fund investment. Corporate investment increases between one-tenth and four-tenths the amount of foreign equity capital entering the country.

Capital Flows --- Capital Markets and Capital Flows --- Consumption --- Corporate Financing --- Domestic Investors --- Emerging Markets --- Finance and Financial Sector Development --- Fiscal & Monetary Policy --- Foreign Investors --- International Economics & Trade --- Investment & Investment Climate --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Mutual Funds --- Non Bank Financial Institutions --- Securities Markets Policy & Regulation --- Use Of Funds