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Sovereigns, Upstream Capital Flows, and Global Imbalances

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  • Alfaro, Laura
  • Kalemli-Ozcan, Sebnem
  • Volosovych, Vadym

Abstract

The paper presents new stylized facts on the direction of capital flows. We find (i) international capital flows net of government debt and/or official aid are positively correlated with growth; (ii) sovereign debt flows are negatively correlated with growth only if debt is financed by another sovereign; (iii) public savings are robustly positively correlated with growth as opposed to private savings. Sovereign to sovereign transactions can fully account for upstream capital flows and global imbalances. These empirical facts contradict the conventional wisdom and constitute a challenge for existing theories.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8648.

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Date of creation: Nov 2011
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Handle: RePEc:cpr:ceprdp:8648

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Related research

Keywords: aid/government debt; current account; productivity; puzzles of flows; reserves;

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References

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Citations

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Cited by:
  1. Friederike Niepmann, 2011. "Banking across Borders," DNB Working Papers 325, Netherlands Central Bank, Research Department.
  2. Steiner, Andreas, 2014. "Current account balance and dollar standard: Exploring the linkages," Journal of International Money and Finance, Elsevier, vol. 41(C), pages 65-94.
  3. Jonathan Heathcote & Fabrizio Perri, 2013. "Assessing International Efficiency," Working Papers 476, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Martin, Alberto & Ventura, Jaume, 2012. "Financial Reforms and Capital Flows: Insights from General Equilibrium," CEPR Discussion Papers 9174, C.E.P.R. Discussion Papers.
  5. Reinhardt, Dennis & Ricci, Luca Antonio & Tressel, Thierry, 2013. "International capital flows and development: Financial openness matters," Journal of International Economics, Elsevier, vol. 91(2), pages 235-251.
  6. Gianluca Benigno & Luca Fornaro, 2012. "Reserve accumulation, growth and financial crises," LSE Research Online Documents on Economics 51506, London School of Economics and Political Science, LSE Library.
  7. Mark Aguiar & Manuel Amador, 2013. "Sovereign Debt: A Review," NBER Working Papers 19388, National Bureau of Economic Research, Inc.
  8. Steiner, Andreas, 2013. "The accumulation of foreign exchange by central banks: Fear of capital mobility?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 409-427.
  9. Aizenman, Joshua & Jinjarak, Yothin & Marion, Nancy P., 2014. "The People's Republic of China's Growth, Stability, and Use of International Reserves," ADBI Working Papers 455, Asian Development Bank Institute.

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