IDEAS home Printed from https://ideas.repec.org/a/ier/iecrev/v42y2001i1p1-24.html
   My bibliography  Save this article

Capital Flight, North-South Lending and Stages of Economic Development

Author

Listed:
  • Sakuragawa, Masaya
  • Hamada, Koichi

Abstract

We present a two-country OLG economy in which international capital mobility exists in the presence of moral hazard in financial contracts. The difference in the extent of asymmetric information is a source of capital movement and capital flows from the South to the North. Even though there exists a unique steady state under autarky, multiple locally stable steady states may emerge in a world economy with an integrated capital market. However, the integration may drive the South down to further impoverishment. The South's government therefore should take into account seriously the timing of capital market liberalization as a conduit of economic development.

Suggested Citation

  • Sakuragawa, Masaya & Hamada, Koichi, 2001. "Capital Flight, North-South Lending and Stages of Economic Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 1-24, February.
    • Handle: RePEc:ier:iecrev:v:42:y:2001:i:1:p:1-24
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Gelb, Alan H., 1989. "Financial policies, growth, and efficiency," Policy Research Working Paper Series 202, The World Bank.
    2. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 155-190, April.
    3. Robert E. Cumby & Richard M. Levich, 1987. "On the Definition and Magnitude of Recent Capital Flight," NBER Working Papers 2275, National Bureau of Economic Research, Inc.
    4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    5. Lane, Philip R & Tornell, Aaron, 1996. "Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-241, June.
    6. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-797, August.
    7. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    8. Ma, Chien-Hui & Smith, Bruce D., 1996. "Credit market imperfections and economic development: Theory and evidence," Journal of Development Economics, Elsevier, vol. 48(2), pages 351-387, March.
    9. Montiel, Peter J, 1994. "Capital Mobility in Developing Countries: Some Measurement Issues and Empirical Estimates," The World Bank Economic Review, World Bank, vol. 8(3), pages 311-350, September.
    10. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
    11. Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
    12. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 495-526.
    13. Tornell, Aaron, 1997. "Economic Growth and Decline with Endogenous Property Rights," Journal of Economic Growth, Springer, vol. 2(3), pages 219-250, September.
    14. Gertler, Mark & Rogoff, Kenneth, 1990. "North-South lending and endogenous domestic capital market inefficiencies," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 245-266, October.
    15. Boyd, John H. & Smith, Bruce D., 1997. "Capital Market Imperfections, International Credit Markets, and Nonconvergence," Journal of Economic Theory, Elsevier, vol. 73(2), pages 335-364, April.
    16. Dellas, Harris & Galor, Oded, 1992. "Growth via External Public Debt and Capital Controls," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 269-281, May.
    17. Cuddington, John T., 1987. "Capital flight ," European Economic Review, Elsevier, vol. 31(1-2), pages 382-388.
    18. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    19. Kyoji Fukao & Koichi Hamada, 1989. "The Fisherian Time Preference and the Ebolution of Capital Ownership Patterns in a Global Economy," NBER Working Papers 3104, National Bureau of Economic Research, Inc.
    20. Galor, Oded & Tsiddon, Daniel, 1992. "Transitory Productivity Shocks and Long-Run Output," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 921-933, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kiminori Matsuyama, 2008. "Aggregate Implications of Credit Market Imperfections," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 1-60, National Bureau of Economic Research, Inc.
    2. Tobias Broer, 2007. "Emerging Market Lending: Is Moral Hazard Endogenous?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 32(2), pages 41-67, December.
    3. Kosuke Aoki & Gianluca Benigno & Nobuhiro Kiyotaki, 2009. "Capital Flows and Asset Prices," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 175-216, National Bureau of Economic Research, Inc.
    4. Wai-Hong Ho, 2017. "Financial market globalization, nonconvergence and credit cycles," Annals of Finance, Springer, vol. 13(2), pages 153-180, May.
    5. Masaya Sakuragawa & Hiroto Takahashi, 2009. "A Global Dynamics of Financial Integration under Capital Market Imperfection -Delaying Financial Liberalization -," Keio/Kyoto Joint Global COE Discussion Paper Series 2009-003, Keio/Kyoto Joint Global COE Program.
    6. Kunieda, Takuma, 2008. "Financial Development, Capital Flow, and Income Differences between Countries," MPRA Paper 11342, University Library of Munich, Germany.
    7. Kiminori Matsuyama, 2014. "Institution-Induced Productivity Differences And Patterns Of International Capital Flows," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 1-24, February.
    8. Marta Aloi & Teresa Lloyd-Braga, 2010. "National labor markets, international factor mobility and macroeconomic instability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(3), pages 431-456, June.
    9. Ho, Wai-Hong, 2017. "Financial market globalization and growth with interdependent countries," Journal of Mathematical Economics, Elsevier, vol. 69(C), pages 12-21.
    10. Been-Lon Chen & Yunfang Hu & Kazuo Mino, 2020. "Capital Allocation and Wealth Distribution in a Global Economy with Financial Frictions," KIER Working Papers 1045, Kyoto University, Institute of Economic Research.
    11. Ryosuke Shimizu, 2018. "Bubbles, growth and imperfection of credit market in a two-country model," Annals of Finance, Springer, vol. 14(3), pages 353-377, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hamada, K. & Sakuragawa, M., 1993. "Capital Flight, North-South Lending, and Stages of economic Development," Papers 682, Yale - Economic Growth Center.
    2. Kiminori Matsuyama, 2008. "Aggregate Implications of Credit Market Imperfections," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 1-60, National Bureau of Economic Research, Inc.
    3. Kiminori Matsuyama, 2005. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 714-723, 04/05.
    4. Yohei Tenryu, 2017. "The role of the private sector under insecure property rights," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(3), pages 285-311, September.
    5. Hakenes, Hendrik & Schnabel, Isabel, 2006. "The Threat of Capital Drain: A Rationale for Public Banks?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 107, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Ayse Imrohoroglu & Krishna B. Kumar, 2003. "Entry Costs, Intermediation, and Capital Flows," Macroeconomics 0304001, University Library of Munich, Germany.
    7. Tenryu, Yohei, 2013. "The Role of the Private Sector under Insecure Property Rights," MPRA Paper 74893, University Library of Munich, Germany, revised 27 Oct 2016.
    8. Huybens, Elisabeth & Smith, Bruce D., 1998. "Financial Market Frictions, Monetary Policy, and Capital Accumulation in a Small Open Economy," Journal of Economic Theory, Elsevier, vol. 81(2), pages 353-400, August.
    9. Günther Rehme, 2007. "Economic Growth and (Re-)Distributive Policies in a Non-cooperative World," Journal of Economics, Springer, vol. 91(1), pages 1-40, May.
    10. Francisco J. Buera & Yongseok Shin, 2017. "Productivity Growth and Capital Flows: The Dynamics of Reforms," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 147-185, July.
    11. Panousi, Vasia, 2009. "Financial Integration and Capital Accumulation," MPRA Paper 24238, University Library of Munich, Germany.
    12. Pol Antràs & Ricardo J. Caballero, 2009. "Trade and Capital Flows: A Financial Frictions Perspective," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 701-744, August.
    13. Wulff, Alexander & Heinemann, Maik, 2015. "Idiosyncratic Risk, Borrowing Constraints and Financial Integration - A Discussion of Ambiguous Results," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113165, Verein für Socialpolitik / German Economic Association.
    14. Ayse Imrohoroglu & Krishna B. Kumar, 2004. "Intermediation Costs and Capital Flows," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 586-612, July.
    15. Chang, Roberto, 1998. "Political party negotiations, income distribution, and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 227-255, April.
    16. Angeletos, George-Marios & Panousi, Vasia, 2011. "Financial integration, entrepreneurial risk and global dynamics," Journal of Economic Theory, Elsevier, vol. 146(3), pages 863-896, May.
    17. Maik Heinemann & Alexander Wulff, 2015. "Idiosyncratic Risk, Borrowing Constraints and Financial Integration - A Discussion of Ambiguous Results," Working Papers 2015019, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    18. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    19. Hung Ly-Dai, 2019. "Non-linear pattern of international capital flows," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 575-600, August.
    20. Pol Antràs & Mihir A. Desai & C. Fritz Foley, 2009. "Multinational Firms, FDI Flows, and Imperfect Capital Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1171-1219.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:42:y:2001:i:1:p:1-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.