International Capital Flows and Aggregate Output
AbstractWe show in a tractable, multi-country OLG model that cross-country differences in financial development explain three recent empirical patterns of international capital flows. International capital mobility affects output in each country directly through the size of domestic investment as well as indirectly through the composition of domestic investment and the level of domestic savings. In contrast to earlier literature, our model admits the possibility that the indirect effects dominate the direct effects and international capital mobility raises output in the poor country and globally, although net capital flows are in the direction of the rich country. Our model adds to the understanding of the benefits of international capital mobility in the presence of financial frictions.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8400.
Date of creation: May 2011
Date of revision:
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Other versions of this item:
- Jurgen von Hagen & Haiping Zhang, 2011. "International Capital Flows and Aggregate Output," Working Papers 20-2011, Singapore Management University, School of Economics.
- Juergen von Hagen & Haiping zhang, 2010. "International Capital Flows and Aggregate Output," Working Papers 10-2010, Singapore Management University, School of Economics.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-DGE-2011-05-30 (Dynamic General Equilibrium)
- NEP-MAC-2011-05-30 (Macroeconomics)
- NEP-OPM-2011-05-30 (Open Economy Macroeconomic)
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