Effect of capital flows on financial stability in middle-income countries
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 3 August 2021
Issue publication date: 7 October 2021
Abstract
Purpose
This study aims to examine the effect of various forms of capital flows on financial stability in middle-income countries from 2010 to 2017 using the World Bank economy classifications of 121 economies.
Design/methodology/approach
Panel spatial correlation consistent approach was used in this study.
Findings
The findings provide convincing evidence that in middle-income countries, capital flows are positive and significant predictors of financial stability and that financial systems in advanced economies are more stable than those of emerging and developing countries. However, outward foreign direct investments are shown to have the largest potential for ensuring financial stability.
Originality/value
Globalization has fostered financial integration of nations, which is manifested in capital flows from lower-income countries to middle-income and upper-income countries and vice versa. These flows can lead to financial instability if not properly controlled. The authors show how the various forms of capital flows affect the financial stability in middle-income countries.
Keywords
Citation
Ebire, K., Ullah, S., Adeleye, B.N. and Shah, M.I. (2021), "Effect of capital flows on financial stability in middle-income countries", Journal of Financial Regulation and Compliance, Vol. 29 No. 5, pp. 491-513. https://doi.org/10.1108/JFRC-08-2020-0081
Publisher
:Emerald Publishing Limited
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