IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007

Listed author(s):
  • Ohanian, Lee E.

    (Stanford University)

  • Restrepo-Echavarria, Paulina

    ()

    (Federal Reserve Bank of St. Louis)

  • Wright, Mark L. J.

    ()

    (Federal Reserve Bank of Chicago)

Since 1950, the economies of East Asia grew rapidly but received little international capital, while Latin America received considerable international capital even as their economies stagnated. The literature typically explains the failure of capital to flow to high growth regions as resulting from international capital market imperfections. This paper proposes a broader thesis that country-specific distortions, such as domestic labor and capital market distortions, also impact capital flows. We develop a DSGE model of Asia, Latin America, and the Rest of the World that features an open-economy business cycle accounting framework to measure these domestic and international distortions, and to quantify their contributions to international capital flows. We find that domestic distortions have been the predominant drivers of international capital flows, and that the general equilibrium effects of these distortions are very large. International capital market distortions also matter, but less so.

If 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.

File URL: http://research.stlouisfed.org/wp/2014/2014-038.pdf
File Function: Full text
Download Restriction: no

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2014-38.

as
in new window

Length: 51 pages
Date of creation: 25 Nov 2013
Date of revision: 04 Nov 2015
Handle: RePEc:fip:fedlwp:2014-038
Contact details of provider: Postal:
P.O. Box 442, St. Louis, MO 63166

Fax: (314)444-8753
Web page: http://www.stlouisfed.org/

More information through EDIRC

Order Information: Email:


References listed on IDEAS
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.:

as
in new window

  1. Menzie D. Chinn & Hiro Ito, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," NBER Working Papers 11370, National Bureau of Economic Research, Inc.
  2. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
  3. Feldstein, Martin, 1983. "Domestic saving and international capital movements in the long run and the short run," European Economic Review, Elsevier, vol. 21(1-2), pages 129-151.
  4. Eric Van Wincoop, 1998. "How big are potential welfare gains from international risksharing?," Staff Reports 37, Federal Reserve Bank of New York.
  5. Wincoop, Eric van, 1994. "Welfare gains from international risksharing," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 175-200, October.
  6. Alan M. Taylor, 1996. "International Capital Mobility in History: Purchasing-Power Parity in the Long Run," NBER Working Papers 5742, National Bureau of Economic Research, Inc.
  7. Hali J. Edison & Francis E. Warnock, 2001. "A simple measure of the intensity of capital controls," International Finance Discussion Papers 708, Board of Governors of the Federal Reserve System (U.S.).
  8. Calomiris, Charles W. & Hanes, Christopher, 1994. "Consistent Output Series for the Antebellum and Postbellum Periods: Issues and Preliminary Results," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 409-422, June.
  9. Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers 5203, C.E.P.R. Discussion Papers.
  10. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, vol. 37(6), pages 1197-1202, August.
  11. Michael Dooley & Jeffrey Frankel & Donald J. Mathieson, 1987. "International Capital Mobility: What Do Saving-Investment Correlations Tell Us?," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 503-530, September.
  12. Alan M. Taylor, 1994. "Domestic Saving and International Capital Flows Reconsidered," NBER Working Papers 4892, National Bureau of Economic Research, Inc.
  13. Ostry, Jonathan D., 2012. "Managing Capital Flows: What Tools to Use?," Asian Development Review, Asian Development Bank, vol. 29(1), pages 83-89.
  14. Obstfeld, Maurice, 1994. "International Capital Mobility in the 1990s," CEPR Discussion Papers 902, C.E.P.R. Discussion Papers.
  15. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  16. Lee E. Ohanian & Mark L. J. Wright, 2010. "Capital Flows and Macroeconomic Performance: Lessons from the Golden Era of International Finance," American Economic Review, American Economic Association, vol. 100(2), pages 68-72, May.
  17. World Bank, 2005. "Where is the Wealth of Nations? Measuring Capital for the 21st Century," World Bank Publications, The World Bank, number 7505.
  18. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  19. Lewis, Karen K, 1996. "What Can Explain the Apparent Lack of International Consumption Risk Sharing?," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 267-297, April.
  20. Pierre-Olivier & Olivier Jeanne, 2009. "Capital Flows to Developing Countries: The Allocation Puzzle," Working Paper Series WP09-12, Peterson Institute for International Economics.
  21. Mario J Crucini & Gregory D Hess, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series 227, CESifo Group Munich.
  22. 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.
  23. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
  24. Barelli, Paulo & Pessoa, Samuel de Abreu, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Working Papers (Ensaios Economicos da EPGE) 477, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  25. Tesar, L.L., 1988. "Savings, Investment And International Capital Flows," Papers 64, Brookings Institution - Working Papers.
  26. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc.
  27. Charles I. Jones, 2003. "Growth, capital shares, and a new perspective on production functions," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  28. Litina, Anastasia & Palivos, Theodore, 2008. "Do Inada conditions imply that production function must be asymptotically Cobb-Douglas? A comment," Economics Letters, Elsevier, vol. 99(3), pages 498-499, June.
  29. Harberger, Arnold C, 1980. "Vignettes on the World Capital Market," American Economic Review, American Economic Association, vol. 70(2), pages 331-337, May.
  30. Frankel, Jeffrey A, 1992. "Measuring International Capital Mobility: A Review," American Economic Review, American Economic Association, vol. 82(2), pages 197-202, May.
  31. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
  32. Lewis, Karen K., 2000. "Why do stocks and consumption imply such different gains from international risk sharing?," Journal of International Economics, Elsevier, vol. 52(1), pages 1-35, October.
  33. Arjun Jayadev, 2007. "Capital account openness and the labour share of income," Cambridge Journal of Economics, Oxford University Press, vol. 31(3), pages 423-443, May.
  34. Sinn, Stefan, 1992. "Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data," Economic Journal, Royal Economic Society, vol. 102(414), pages 1162-1170, September.
  35. Natalia T. Tamirisa, 1998. "Exchange and Capital Controls as Barriers to Trade," IMF Working Papers 98/81, .
  36. Jacques Miniane, 2004. "A New Set of Measures on Capital Account Restrictions," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-4.
  37. Barelli, Paulo & de Abreu Pessoa, Samuel, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Letters, Elsevier, vol. 81(3), pages 361-363, December.
  38. Mario J. Crucini, 1999. "On International and National Dimensions of Risk Sharing," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 73-84, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2014-038. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.