A Portfolio Theory of International Capital Flows

Michael Devereux and Makoto Saito

No 112006, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper constructs a model in which the currency composition of national portfolios is an essential element in facilitating capital flows between countries. In a two country environment, each country chooses optimal nominal bond portfolios in face of real and nominal risk. Current account deficits are financed by increases in domestic currency debt, but balanced by increases in foreign currency credit. This is combined with an evolution of risk-premiums such that the rate of return on the debtor country¡¦s gross liabilities is lower than the return on its gross assets. This ensures stability of the world wealth distribution.

Pages: 31 pages
Date: 2006-09
New Economics Papers: this item is included in nep-cba and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
http://www.hkimr.org/uploads/publication/205/ub_full_0_2_133_hkimr-no11_bw.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/205/ub_full_0_2_133_hkimr-no11_bw.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/205/ub_full_0_2_133_hkimr-no11_bw.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/205/ub_full_0_2_133_hkimr-no11_bw.pdf)

Related works:
Working Paper: A Portfolio Theory of International Capital Flows (2006)
Working Paper: A Portfolio Theory of International Capital Flows (2006)
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:hkm:wpaper:112006

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().