Capital Flows, Investment, and Exchange Rates

Alan Stockman and Lars Svensson

No 1598, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper incorporates international capital flows into a two-country, monetary-general-equilibrium model of asset prices with investment and production. We use the model to calculate theoretical covariances between investment, the current account, the exchange rate, and the terms of trade.These covariances depend upon the coefficient of relative risk-aversion, the magnitude and sign of a country's net international indebtedness, other properties of tastes and technologies, and the stochastic processes on disturbances to productivity and monetary growth rates. International capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets. The dynamic, stochastic relations between capital flows, exchange rates, investment, and the terms of trade are critically dependent on optimal portfolio allocations and the stochastic behavior of asset prices on international financial markets.

Date: 1985-04
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Published as Stockman, Alan C. and Lars E.O. Svensson. "Capital Flows, Investment, and Exchange Rates," Journal of Monetary Economics, Vol. 19, (1987), pp. 171-201 .

Downloads: (external link)
http://www.nber.org/papers/w1598.pdf (application/pdf)

Related works:
Journal Article: Capital flows, investment, and exchange rates (1987)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1598

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1598

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().