The effects of portfolio investments on macroeconomic indicators

International capital movements have become an important phenomenon for economies, especially since the 1980s when financial liberalization took place in many countries. Especially capital inflows to the least developed and developing countries have affected the macroeconomic indicators in these economies. By means of these capital flows, undeveloped countries have obtained the funds they need for their development, raised domestic income levels and started to attain a place in the world economy. Portfolio investments, a type of capital flows, are investments of foreing investors in capital market instruments. Portfolio investments affect many economic indicators such as national income, inflation, foreign trade, interest rates, and balance of payments etc. in financially liberalized countries. This dissertation investigates the impact of portfolio investments on macroeconomic variables in a country. Particularly, the study analyzes, using a panel data, the effect of portfolio investments on national income, inflation, invesment, national income per capita, imports and exports.