The Determinants of International Capital Flows: Evidence from Emerging Market Economies

Abstract

The withdrawal of international capital flows from emerging countries induces comprehensive concern about emerging market economies growth. This paper estimate a panel VAR to research the determinant factor of international capital flows based on 26 emerging market economies. The results suggest that vxo index and domestic economy growth have a significant effect on international capital flows, they account for about 16% of international capital flows, but the interest rate difference between domestic and U.S. market and U.S. economy growth have a week effect. And the present international capital flows could strongly affect the next period. The empirical results are significant for managing emerging countries’ international capital flows.