Globalization and the increasing correlation between capital inflows and outflows

Jonathan Davis and Eric Van Wincoop

Journal of Monetary Economics, 2018, vol. 100, issue C, 83-100

Abstract: The correlation between capital inflows and outflows has increased substantially over time in a sample of 127 advanced and developing countries. We provide evidence that this is a result of an increase in financial globalization (stock of external assets and liabilities). This dominates the effect of an increase in trade globalization (exports plus imports), which reduces the correlation between capital inflows and outflows. In the context of a two-country model with 8 shocks we show that the theoretical impact of financial and trade globalization on the correlation between capital inflows and outflows is consistent with the data.

Keywords: Capital inflows and outflows; Financial globalization; Trade globalization (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Globalization and the Increasing Correlation between Capital Inflows and Outflows (2017)
Working Paper: Globalization and the Increasing Correlation between Capital Inflows and Outflows (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:100:y:2018:i:c:p:83-100

DOI: 10.1016/j.jmoneco.2018.07.009

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