THE LONG-RUN IMPACT OF GLOBALIZATION ON PORTFOLIO INVESTMENTS: PANEL EVIDENCE

Abstract

Globalization may play an important role in attracting portfolio investment in both short -run and long-run. In order totest the validity of this relation, this study empirically examines the long-run relationship between globalization andportfolio investments by using a balanced panel data of 66 countries covering the period of 2004-2014. The resultsgathered from panel cointegration tests reveal that there exists a positive statistically significant association betweenglobalization and porfolio investments in both short -run and long-run. According to the findings, if globalization indexvalue goes up by 1% then portfolio investments increase by 5.8% in the long-run whereas this rise is just by 3.9% inthe short-run. Besides, panel causality test results show that there is a two-way causality between globalization andportfolio investments.