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Organizational Capital and the International Co-movement of Investment

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  • Alok Johri
  • Marc-Andre Letendre
  • Daqing Luo

Abstract

A recent literature explores the macroeconomic implications of organizational capital (OC) and especially its ability to resolve discrepancies between existing models and data. This paper contributes to the OC literature by studying the effect of OC on international investment flows in the context of a two-country real business cycle model. The presence of OC introduces novel considerations into agents' investment decisions since current investment and future productivity levels are positively linked. These new considerations help bring the model closer to the data. In response to a productivity shock in one country, investment increases in both countries, producing positive international co-movement in investment, a feature of the data that several IRBC models fail to produce.

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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2011-03.

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Length: 35 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:mcm:deptwp:2011-03

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Keywords: international RBC; learning by doing; organizational capital; cross-country correlations; investment.;

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References

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Cited by:
  1. Alok Johri & Marc-Andre Letendre & Daqing Luo, 2011. "Organizational Capital and the International Co-movement of Investment," Department of Economics Working Papers 2011-03, McMaster University.
  2. Dmitriev, Alexandre & Roberts, Ivan, 2013. "The cost of adjustment: On comovement between the trade balance and the terms of trade," Economic Modelling, Elsevier, vol. 35(C), pages 689-700.
  3. Alok Johri & Bidyut Kumar Talukdar, 2011. "Organizational Capital and Optimal Ramsey Taxation," Department of Economics Working Papers 2011-09, McMaster University.

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