A Disequilibrium Model of International Capital Mobility
Paper presented at the 2nd Annual Conference on Global Economics Analysis, Denmark, June 20-22. The paper proposes a new disequilibrium approach to modeling international capital mobility for a dynamic multi- region general equilibrium model. Key to this approach are errors in investors’ assessments of potential returns to capital, such as those recently observed in Asia. The investment theory, compatible with a simple recursive solution procedure, ensures the convergence of the model towards a stable equilibrium, brings realism into the analysis of international capital mobility and flexibility in tailoring to empirical data. The paper discusses two numerical examples, demonstrating the long- run convergence of the model and the dynamic adjustment to a deeper, longer crisis in Asia.
|Date of creation:||2000|
|Date of revision:|
|Note:||GTAP Working Paper No. 10|
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