Financial Reforms and Capital Flows: Insights from General Equilibrium
AbstractAs a result of debt enforcement problems, many high-productivity firms in emerging economies are unable to pledge enough future profits to their creditors and this constrains the financing they can raise. Many have argued that, by relaxing these credit constraints, reforms that strengthen enforcement institutions would increase capital flows to emerging economies. This argument is based on a partial equilibrium intuition though, which does not take into account the origin of any additional resources that flow to high-productivity firms after the reforms. We show that some of these resources do not come from abroad, but instead from domestic low-productivity firms that are driven out of business as a result of the reforms. Indeed, the resources released by these low-productivity firms could exceed those absorbed by high-productivity ones so that capital flows to emerging economies might actually decrease following successful reforms. This result provides a new perspective on some recent patterns of capital flows in industrial and emerging economies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18454.
Date of creation: Oct 2012
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Alberto Martin & Jaume Ventura, 2012. "Financial reforms and capital flows: Insights from general equilibrium," Economics Working Papers 1340, Department of Economics and Business, Universitat Pompeu Fabra.
- Alberto Martin & Jaume Ventura, 2012. "Financial Reforms and Capital Flows: Insights from General Equilibrium," Working Papers 664, Barcelona Graduate School of Economics.
- Martin, Alberto & Ventura, Jaume, 2012. "Financial Reforms and Capital Flows: Insights from General Equilibrium," CEPR Discussion Papers 9174, C.E.P.R. Discussion Papers.
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-IFN-2012-10-20 (International Finance)
- NEP-OPM-2012-10-20 (Open Economy Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aoki, Kosuke & Benigno, Gianluca & Kiyotaki, Nobuhiro, 2010.
"Adjusting to Capital Account Liberalization,"
CEPR Discussion Papers
8087, C.E.P.R. Discussion Papers.
- Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2011.
"Sovereigns, Upstream Capital Flows, and Global Imbalances,"
NBER Working Papers
17396, National Bureau of Economic Research, Inc.
- Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2011. "Sovereigns, Upstream Capital Flows and Global Imbalances," Tinbergen Institute Discussion Papers 11-126/2, Tinbergen Institute.
- Alfaro, Laura & Kalemli-Ozcan, Sebnem & Volosovych, Vadym, 2011. "Sovereigns, Upstream Capital Flows, and Global Imbalances," CEPR Discussion Papers 8648, C.E.P.R. Discussion Papers.
- repec:dgr:uvatin:2011126 is not listed on IDEAS
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Financial reform need not increase capital flows to emerging markets
by Economic Logician in Economic Logic on 2012-11-06 15:15:00
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.