The Surge in Capital Flows: Analysis of 'Pull' and 'Push' Factors

Pierre-Richard Agénor

International Journal of Finance & Economics, 1998, vol. 3, issue 1, 39-57

Abstract: This paper uses an intertemporal optimizing model of a small open economy facing imperfect world capital markets to assess the effects of "pull" and "push" factors on capital flows, asset accumulation, and the real exchange rate. A positive money demand shock raises consumption and holdings of foreign assets and appreciates the real exchange rate in the long run; it has an ambiguous effect on real money balances on impact. A positive productivity shock in the traded goods sector also leads to a long-run real appreciation (the Balassa-Samuelson effect), but the impact effect on relative prices is ambiguous. An increase in government spending on home goods leads to a real appreciation in the long run, but it has an ambiguous effect on the economy's stock of net foreign assets. The dynamic effects associated with a reduction in the world interest rate depend on the degree of intertemporal substitution in consumption and the initial asset position of private agents. Copyright @ 1998 by John Wiley & Sons, Ltd. All rights reserved.

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www3.interscience.wiley.com/cgi-bin/jtoc?ID=15416 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:ijf:ijfiec:v:3:y:1998:i:1:p:39-57

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().