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The Lucas Paradox in the Great Recession: Does the type of capital matter?

Alba Del Villar Olano ()
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Alba Del Villar Olano: Universidad Pública de Navarra

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Economics Bulletin, 2018, vol. 38, issue 2, 1052-1057

Abstract: This paper is the first to examine the Lucas Paradox during the Great Recession. Results show that in the 2008-2015 period, the Paradox might be even more pronounced than in the previous decades. Moreover, our findings suggest that disaggregating capital flows by type of capital is important since trade flows are found to be a key determinant of Foreign Direct Investment (FDI) and credit to private sector mostly explains Portfolio Equity flows. The quality of institutions, although statistically significant, does not provide the solution for the Lucas puzzle.

Keywords: Lucas Paradox; Great Recession; International Capital flows; Institutions (search for similar items in EconPapers)
JEL-codes: E2 F2 (search for similar items in EconPapers)
Date: 2018-05-25
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