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International Capital Flows and National Creditworthiness: Do the Fundamental Things Apply As Time Goes By?

Author

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  • Mr. Paul Cashin
  • Mr. C. John McDermott

Abstract

This paper examines the optimality of international capital flows to a persistent net importer of capital, Australia, during its post-capital-controls period 1984-98. The results suggest that international capital flows were larger than optimal during the 1980s, but in the 1990s such flows have been broadly consistent with those predicted by the consumption-smoothing approach to the determination of the current account. The paper also discusses the main implications arising from measures of optimal capital flows, and compares them with the implications arising from the key concepts used in the determination of national creditworthiness.

Suggested Citation

  • Mr. Paul Cashin & Mr. C. John McDermott, 1998. "International Capital Flows and National Creditworthiness: Do the Fundamental Things Apply As Time Goes By?," IMF Working Papers 1998/172, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1998/172
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    Citations

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    Cited by:

    1. Kunhong Kim & Viv B Hall & Robert A Buckle, 2001. "New Zealand's Current Account Deficit: Analysis based on the Intertemporal Optimisation Approach," Treasury Working Paper Series 01/02, New Zealand Treasury.
    2. Aleksander Aristovnik, 2006. "Current Account Sustainability In Selected Transition Countries," William Davidson Institute Working Papers Series wp844, William Davidson Institute at the University of Michigan.
    3. Ricardo Bebczuk & Klaus Schmidt-Hebbel, 2010. "Revisiting the Feldstein-Horioka Puzzle: An institutional sector view," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 69-104, January-D.
    4. Aristovnik, Aleksander, 2006. "How sustainable are current account deficits in selected transition economies?," MPRA Paper 485, University Library of Munich, Germany.
    5. Khundrakpam, J. K. & Ranjan, Rajiv, 2008. "Can an Inter-temporal Model Explain India's Current Account Balance?," MPRA Paper 50928, University Library of Munich, Germany.

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