Financial development, international capital flows, and aggregate output

Juergen von Hagen and Haiping Zhang ()

Journal of Development Economics, 2014, vol. 106, issue C, 66-77

Abstract: We develop a tractable two-country overlapping-generations model and show that cross-country differences in financial development can explain three recent empirical patterns of international capital flows: Financial capital flows from relatively poor to relatively rich countries, while foreign direct investment flows in the opposite direction; net capital flows go from poor to rich countries; despite its negative net international investment positions, the United States receives a positive net investment income.

Keywords: Capital account liberalization; Financial frictions; Interest-elastic saving (search for similar items in EconPapers)
JEL-codes: E44 F41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:106:y:2014:i:c:p:66-77

DOI: 10.1016/j.jdeveco.2013.08.010

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