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Globalization and the Increasing Correlation between Capital Inflows and Outflows

Jonathan Davis () and Eric van Wincoop ()

No 23671, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document that 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 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-opm
Date: 2017-08
Note: IFM
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Published as J. Scott Davis & Eric Van Wincoop, 2018. "Globalization and the increasing correlation between capital inflows and outflows," Journal of Monetary Economics, .

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Journal Article: Globalization and the increasing correlation between capital inflows and outflows (2018) Downloads
Working Paper: Globalization and the Increasing Correlation between Capital Inflows and Outflows (2017) Downloads
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