Non-linear pattern of international capital flows

Ly Hung

Review of World Economics (Weltwirtschaftliches Archiv), 2019, vol. 155, issue 3, No 6, 575-600

Abstract: Abstract In a two-country OLG model with interest rate wedges capturing financial frictions, international capital flows can follow a non-linear pattern, depicted as a U-shaped curve, by first decreasing and then increasing in growth. The turning point of the curve is determined by the world average growth rate and these interest rate wedges. The model developed in this paper can reconcile different theories (i.e, the implications of the neoclassical growth model, up-hill capital flows, and the allocation puzzle) on the pattern of international capital flows.

Keywords: International capital flows; Productivity growth; Financial frictions (search for similar items in EconPapers)
JEL-codes: F15 F36 F43 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Working Paper: Non-Linear Pattern of International Capital Flows (2018)
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DOI: 10.1007/s10290-019-00349-y

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