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Composition of International Capital Flows: A Survey

Koralai Kirabaeva and Assaf Razin ()
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Koralai Kirabaeva: Bank of Canada

No 142011, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We survey several mechanisms that explain the composition of international capital flows: foreign direct investment, foreign portfolio investment and debt flows (bank loans and bonds). We focus on information frictions such as adverse selection and moral hazard, and exposure to liquidity shocks, and discuss the following implications for composition of capital flows: (1) home-court information advantage; (2) panic-based capital-flow reversals; (3) information-liquidity trade-off in the presence of source and host country liquidity shocks; (4) moral hazard in international debt contracts; and (5) risk sharing role of domestic bonds in the presence of home bias in goods and equities.

Pages: 32 pages
Date: 2011-05
New Economics Papers: this item is included in nep-bec, nep-cta and nep-ifn
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Related works:
Working Paper: Composition of International Capital Flows: A Survey (2010) Downloads
Working Paper: Composition of International Capital Flows: A Survey (2010) Downloads
Working Paper: Composition of International Capital Flows: A Survey (2009) Downloads
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