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International capital mobility in the 1990s

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  • Maurice Obstfeld

Abstract

This paper surveys the performance of international capital markets and the literature on measuring international capital mobility. Three main functions of a globally integrated and efficient world capital market provide focal points for the analysis. First, asset-price arbitrage ensures that people in different countries face identical prices for a given asset. Second, to the extent that the usual market failures allow, people in different countries can pool risks to their lifetime consumption profiles. Third, new saving, regardless of its country of origin, is allocated toward the world's most productive investment opportunities. The paper evaluates the international capital market's performance of these roles by studying data on international interest-rate differences, international consumption correlations, international portfolio diversification, and the relation between national saving and investment rates. The conclusion is that while international capital mobility has increased markedly over the last two decades, international capital movements remain less free than international movements, even among the industrial countries.

Suggested Citation

  • Maurice Obstfeld, 1994. "International capital mobility in the 1990s," International Finance Discussion Papers 472, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:472
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    Cited by:

    1. Kevin H. O'Rourke & Jeffrey G. Williamson, 1999. "The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why," NBER Working Papers 7411, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Capital movements;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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