Essays on the Determinants of International Equity Flows
In this dissertation, I address the topic of the determinants of international equity flows in three segments. The first segment discusses the determinants of OFDI from developing countries, with evidence from China. The focus is on the impact of host country’s institutions, exchange rate volatility and natural resources on China’s OFDI. I perform an econometric analysis for 2003-2013 on 49 countries. Using fixed effects regressions, our results reveal that China’s OFDI is invested in countries with relatively poor institutional quality and abundant natural resources. Exchange rate variability has a dampening effect on China’s OFDI. The relative appreciation of the Chinese RMB enhances OFDI flows. China’s OFDI is also associated with larger market size and greater openness of the host country. In the second segment, I examine the determinants of the composition of international equity flows, at the level of the source country. Based on the theory of trade-off between information-efficiency and reselling price, this part focuses on the effects of investors’ expectations of liquidity needs in the source country, which is instrumented by external debt liabilities of the source country. Using TSLS as well as Dynamic Panel Data GMM estimations on a panel data of 91 countries during 1985-2011, I find that the ratio of FPI to FDI is higher when there are expectations of liquidity shortage in the future, and higher past ratio leads to higher present FPI to FDI composition. In the third segment, I further investigate the determinants of the composition of FPI vs FDI in a gravity model including the factors from both the source and host country. I perform econometric analysis with the bilateral external asset stocks between 18 countries during 2001-2011 and the results support the major hypotheses in segment 2. In addition, I find that the depreciation of host country currency increases the ratio of FPI/FDI. Longer distance reduces FPI, but the impact on FDI and the ratio of FPI/FDI are not significant. Host countries with larger GDP, more stable political environment, and more foreign reserves attract more FPI, while countries that are more open to international trade attract more FDI.
Li, Yang, "Essays on the Determinants of International Equity Flows" (2017). ETD Collection for Fordham University. AAI10278298.