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On the savings wedge in international capital flows

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  • Rothert, Jacek

Abstract

I explore the determinants of the savings wedge in international capital flows computed in a sample of 68 developing countries in Gourinchas and Jeanne (2013). I show that size (rather than allocation) of net capital flows in the data is the major cause of the negative correlation between the calibrated savings wedge and productivity growth.

Suggested Citation

  • Rothert, Jacek, 2016. "On the savings wedge in international capital flows," Economics Letters, Elsevier, vol. 145(C), pages 126-129.
  • Handle: RePEc:eee:ecolet:v:145:y:2016:i:c:p:126-129
    DOI: 10.1016/j.econlet.2016.05.030
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    References listed on IDEAS

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    1. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    2. Pierre-Olivier Gourinchas & Olivier Jeanne, 2013. "Capital Flows to Developing Countries: The Allocation Puzzle," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1484-1515.
    3. Mark Aguiar & Manuel Amador, 2011. "Growth in the Shadow of Expropriation," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 651-697.
    4. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-185, March.
    5. Michaud, Amanda & Rothert, Jacek, 2014. "Optimal borrowing constraints and growth in a small open economy," Journal of International Economics, Elsevier, vol. 94(2), pages 326-340.
    6. Jacek Rothert & Jacob Short, 2014. "Non-Traded Goods and Capital Flows to Developing Countries," Departmental Working Papers 47, United States Naval Academy Department of Economics.
    7. Yan Bai & Jing Zhang, 2010. "Solving the Feldstein-Horioka Puzzle With Financial Frictions," Econometrica, Econometric Society, vol. 78(2), pages 603-632, March.
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    Cited by:

    1. Andrés Fernández & Ayşe İmrohoroğlu & Cesar E. Tamayo, 2019. "Saving Rates in Latin America: A Neoclassical Perspective," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(4), pages 791-823, December.
    2. Cozzi, Guido & Davenport, Margaret, 2017. "Extrapolative expectations and capital flows during convergence," Journal of International Economics, Elsevier, vol. 108(C), pages 169-190.

    More about this item

    Keywords

    Allocation puzzle; Savings wedge; Capital flows;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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