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You only live twice: Financial inflows and growth in a westward-facing Ukraine

Author

Listed:
  • Yuriy Gorodnichenko

    (University of California, Berkeley)

  • Maurice Obstfeld

    (Peterson Institute for International Economics)

Abstract

The monumental task of rebuilding postwar Ukraine requires early planning and identification of growth strategies. The earlier accession of Eastern European countries to the European Union and NATO offers a template that relies on massive foreign direct investment and public structural funds. This approach helps to raise incomes directly and can create a virtuous circle where capital deepening facilitates technological upgrades and repatriation of war refugees, which in turn stimulate more investment. The authors show theoretically that the government can refine this strategy by internalizing positive externalities from having a higher capital stock: Investment in physical capital relaxes borrowing constraints (thus allowing more capital inflows) and raises wages (thus encouraging more Ukrainian refugees to return home).

Suggested Citation

  • Yuriy Gorodnichenko & Maurice Obstfeld, 2026. "You only live twice: Financial inflows and growth in a westward-facing Ukraine," Working Paper Series WP26-1, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp26-1
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    More about this item

    Keywords

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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F2 - International Economics - - International Factor Movements and International Business
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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