Abstract:

This study examines capital movements from the perspective of developing countries namely (Brazil, Argentina, Turkey, South Africa, Mexico, India and Indonesia). Those countries are more affected by capital movements due to their unstable macroeconomic orders and the inadequacies in their financial systems. In this respect, the study uses the operation panel data analysis to analyze the relationship between the FDI inputs in those developing countries with similar macroeconomic indicators and financial instability indicators. Annual data for the period of 2008-2019 was used and the current account deficit / output ratio, total reserve / external debt ratio and non-performing loans / total loans were taken as indicators of financial instability in the model. Driscoll-Kraay estimator was used in regression estimation by using one-way fixed effects model which is one of the panel data analysis methods. According to the results of the model, a reverse and significant relationship was found between direct investments and current account deficit /output ratio. Another significant and positive relationship was found between the non-performing loans / total loans ratio and the total reserves / total external debt variable.

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