Trade and Capital Flows: A Financial Frictions Perspective

Pol Antrà S and Ricardo Caballero ()
Authors registered in the RePEc Author Service: Pol Antras

Journal of Political Economy, 2009, vol. 117, issue 4, 701-744

Abstract: The classical Heckscher-Ohlin-Mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to flow to capital-scarce countries. In this paper we show that in a world with heterogeneous financial development, a very different conclusion emerges. In particular, in less financially developed economies (South), trade and capital mobility are complements in the sense that trade integration increases the return to capital and thus the incentives for capital to flow to South. This interaction implies that deepening trade integration in South raises net capital inflows (or reduces net capital outflows). It also implies that, at the global level, protectionism may backfire if the goal is to rebalance capital flows. (c) 2009 by The University of Chicago. All rights reserved.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (202)

Downloads: (external link)
http://dx.doi.org/10.1086/605583 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Trade and Capital Flows: A Financial Frictions Perspective (2007)
Working Paper: Trade and Capital Flows: A Financial Frictions Perspective (2007)
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:ucp:jpolec:v:117:y:2009:i:4:p:701-744

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().