Effect of capital flows on financial stability in middle-income countries. Issue 5 (3rd August 2021)

• Record Type: Journal Article
• Authors: Ebire, Kolawole; Ullah, Saif; Adeleye, Bosede Ngozi; Shah, Muhammad Ibrahim
• Is Part Of: Journal of financial regulation and compliance. Volume 29:Issue 5(2021)
• Page Start: 491
• Page End: 513
• Publication Date: 2021-08-03
• Subjects: Capital flows -- Financial stability -- Foreign direct investment -- Middle-income countries; E58 -- F20 -- F30 -- G01; Financial institutions -- Law and legislation -- Periodicals; Banking law -- Periodicals; Financial services industry -- State supervision -- Periodicals; Banks and banking -- State supervision -- Periodicals; Independent regulatory commissions -- Periodicals; 346.082
• DOI: 10.1108/JFRC-08-2020-0081
• Languages: English
• ISSNs: 1358-1988

Abstract

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.