flows, such as foreign aid and remittance inflows, were collected from the World Bank’s World Development Indicators (WDI). The GDP level and growth data were gathered from the WDI. The set of pull factors considered in this paper also includes the Consumer Price Index (CPI) inflation (computed as log differences in the CPI) from WDI, the general government primary balance a percentage of GDP from the IMF’s World Economic Outlook, the exchange rate regime based on the Fine classification of exchange rate regimes developed by Reinhart, and Rogoff (2004) and updated by Ilzetzki, Reinhart and Rogoff (2017), and trade openness as the ratio of exports and imports to GDP from the WDI, and the index of financial openness from Chinn-Ito (2006, 2008). Other important pull factors are the quality of institutions proxied by the following ICRG components: investment profile (which accounts for contract viability, expropriation, and profits repatriation), socio-economic conditions (capturing forces at work in society that could constrain government action or fuel social dissatisfaction), government stability (which reflects the government's ability to carry out its declared policies), rule of law (which captures the strength and impartiality of the legal system, and the popular observance of the law), bureaucratic quality (reflecting the strength and expertise of the bureaucracy to govern without drastic changes in policy or interruption in government services), and corruption. Higher values of all these ICRG components imply higher quality of institutions. Push factors are foreign growth as the trade-weighted GDP growth of main trading partners, the VIX index measures volatility computed using S&P 500 index options, and US policy uncertainty is captured by the baseline overall index computed by Baker, Bloom and Davis (2015). Other external factors are commodity prices such as the international price of oil, the price index of minerals and metals, the price of agricultural commodities, and an index of commodity terms of trade which are gathered from the World Bank’s Commodity Outlook.

# 4. **Empirical Evidence**

# **4.1 IV Estimation**

This section analyzes the empirical results from the instrumental variable method. The dependent variable is gross capital inflows as a ratio of GDP. The different types of capital flows are also included as alternative dependent variables such as gross FDI inflows, gross PI inflows, and gross OI inflows. The set of determinants chosen follows recent empirical literature—for example, Forbes and Warnock (2012), Calderón and Kubota (2019), and Ghosh et al. (2014). Pull factors are domestic factors that attract foreign capital flows, such as domestic economic growth, the level of development (as measured by the GDP per capita), consumer price index inflation, primary balance, exchange rate flexibility, quality of institutions (as proxied by ICRG indicators such as investment profile, government stability, socioeconomic conditions, corruption, bureaucratic quality, among others), trade openness and financial openness. The push or external factors considered in this analysis are the US stock market volatility index (VIX), economic growth of main trading partners, US policy uncertainty, and commodity terms of trade, as well as the international price of oil and the international price index for minerals and metals. The regression analysis compares the behavior of pull and push factors across different time periods: 1980–2017, 1980–99, and 2000–17. This implicitly tests whether financial globalization plays a role in driving changes in the sensitivity of capital inflows to pull and push factors. We run those regressions of the different groups such as all countries, advanced countries, non-SSA countries, Sub-Saharan countries, and natural resource abundant countries. We control the potential endogeneity of domestic GDP growth by using the lagged values of the commodity terms of trade and the domestic GDP growth as instruments.

Tables 1 to 10 analyze drivers of gross capital inflows using linear regression techniques while Tables 11 to 14 investigate non-linearity aspects of the relationship between capital inflows and their domestic and 9