How do Global Capital Flows Affect Economic Growth? Unlocking the Puzzle via a Meta-Regression Analysis of Existing Studies

Abstract

Due to the various empirical and theoretical perspectives of capital flows and management techniques’ effects on economic growth, the thesis asks: “How do Global Capital Flows Affect Economic Growth?”. The relationship between flow or flow-managing policies and measures and economic growth and development is well documented, with differing conclusions in Keynesian and neo-classical theory, as well as varying conclusions from more recent empirical assessments. The question is assessed through comparing the results from frequentist and Bayesian meta-regression analyses, an unusual approach in the social sciences, providing methodological innovation. The data of the thesis consists of extracted coefficients and between-study characteristics from existing and accessible empirical research from seventeen studies published in various journals from 1994-2022, compiled in an own set of metadata, who either investigate the relationship between capital flows and economic growth, capital controls on growth or various flow measures on economic growth. The empirical analysis of the data suggests a positive relationship between capital flows and economic growth, but there is slight publication bias present for positively reported results, and contextual and methodological moderators between studies highly impact the reported outcomes in research negatively. The findings highlight the need for specifically tailored and nuanced policy approaches and analyses, considering the economic conditions, data quality and potential biases when designing and implementing capital flow management strategies in domestic and foreign economies, to ensure effective economic policies that promote sustainable growth and mitigate potential financial risks and instability.