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Non-Linear Pattern of International Capital Flows

Author

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  • Ly Dai Hung

    (Vietnam Institute of Economics, Hanoi, Vietnam)

Abstract

We establish one non-linear pattern of international capital flows by building up one two-country OLG economy. With symmetric growth and asymmetric interest rate wedges across countries, net total capital inflows are either decreasing or increasing on productivity growth rate. However, with asymmetric growth and asymmetric wedges, they follow one U-shaped curve by first decreasing and then increasing on growth. The turning point of the curve is built on world average growth rate and wedges. Our proposed model can provide an explanation for inconsistencies between theories (i.e, Lucas paradox, uphill capital flows, and allocation puzzle) about the pattern of international capital flows.

Suggested Citation

  • Ly Dai Hung, 2018. "Non-Linear Pattern of International Capital Flows," Working Papers hal-01935151, HAL.
    • Handle: RePEc:hal:wpaper:hal-01935151
    Note: View the original document on HAL open archive server: https://hal.science/hal-01935151
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    References listed on IDEAS

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    7. Lee E. Ohanian & Paulina Restrepo-Echavarria & Mark L. J. Wright, 2013. "Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007," Working Papers 2014-38, Federal Reserve Bank of St. Louis.
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    Cited by:

    1. Ly Dai Hung & Hoan Nguyen Thi Thuy, 2020. "International capital flows in club of convergence," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(8), pages 1401-1420, November.
    2. Ly Dai Hung & Nguyen Thi Thuy Hoan, 2022. "International Capital Flows When Safe Assets Scarcity Matters," South Asian Journal of Macroeconomics and Public Finance, , vol. 11(2), pages 151-167, December.

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    More about this item

    Keywords

    Allocation Puzzle; Capital Flows; Financial Frictions; Productivity Growth;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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