Sovereign wealth funds’ cross-border investments: Assessing the role of country-level drivers and spatial competition

Research output: Contribution to journalArticle

Abstract

The aim of this paper is to identify the driving forces of cross-border investments emanating from Sovereign wealth funds and to test the existence of spatial competition among recipient countries. For this, we develop an original econometric framework that quantifies the role of spatial dependence in the location of investments, and that uses a modified version of the standard estimation procedure of spatial panel model, which accommodates the Inverse Hyperbolic Sine transformation of the dependent variable. This transformation copes with two critical features of net capital flows, namely an highly skewed distribution and the presence of zero and negative values. Using a large-scale database, we provide evidence of negative spatial dependence, investments in one country being on average at the expense of its neighbors.

Original languageEnglish
Pages (from-to)68-87
Number of pages20
JournalJournal of International Money and Finance
Volume76
DOIs
Publication statusPublished - 1 Sep 2017

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Sovereign wealth funds
Cross-border investment
Spatial competition
Spatial dependence
Expenses
Skewed distribution
Econometrics
Capital flows
Data base
Driving force
Panel model

Keywords

  • Interactions
  • Inverse Hyperbolic Sine transformation
  • Pull factors
  • Sovereign wealth funds
  • Spatial econometrics

Cite this

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title = "Sovereign wealth funds’ cross-border investments: Assessing the role of country-level drivers and spatial competition",
abstract = "The aim of this paper is to identify the driving forces of cross-border investments emanating from Sovereign wealth funds and to test the existence of spatial competition among recipient countries. For this, we develop an original econometric framework that quantifies the role of spatial dependence in the location of investments, and that uses a modified version of the standard estimation procedure of spatial panel model, which accommodates the Inverse Hyperbolic Sine transformation of the dependent variable. This transformation copes with two critical features of net capital flows, namely an highly skewed distribution and the presence of zero and negative values. Using a large-scale database, we provide evidence of negative spatial dependence, investments in one country being on average at the expense of its neighbors.",
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