Empirical evidence on international capital immobility: a consumption-based approach
Sulaiman Al-Jassar and
Imad A. Moosa
International Review of Applied Economics, 2020, vol. 34, issue 2, 175-192
Based on consumption patterns and consumption-income correlation, a measure of capital mobility is proposed and used to demonstrate that capital mobility is low and that it is lower for low-income than high-income countries. While this result can be dismissed as being based on an unreliable measure of capital mobility or accepted as constituting a puzzle, it can be rationalised intuitively. While capital mobility provides benefits, it can be detrimental to the recipient country, which encourages the imposition of capital controls. Capital mobility can be impeded by home bias and failure of the benefits of international diversification to materialise.
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