Globalization and the Increasing Correlation between Capital Inflows and Outflows

Jonathan Davis and Eric van Wincoop

No 323, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: The correlation between capital inflows and outflows has increased substantially over time in a sample of 128 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 14 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.

JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-08-01
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Globalization and the increasing correlation between capital inflows and outflows (2018)
Working Paper: Globalization and the Increasing Correlation between Capital Inflows and Outflows (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:323

DOI: 10.24149/gwp323

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