Capital Flows: Expansionary or Contractionary?

Capital Flows and Capital Goods*

Studying the relation between equity market liberalization and imports of capital goods, we examine one channel through which international financial integration can promote growth. For the period 1980-1997, we find that after controlling for other policies and fundamentals, stock market liberalizations are associated with a significant increase in the share of imports of machinery and equipmen...

Capital Flows

In this paper, we reexamine the question “Why doesn’t capital ßow from rich to poor countries?” posed by Lucas (1990). Our Þndings suggest that even if capital ßows freely it will ßow to middle income countries rather than to poor countries. We start with the stylized fact that poorer countries have high intermediation costs, and develop a simple disaggregation of the neoclassical production fu...

Controlling International Capital Flows

The East Asian financial crisis in the late 1990s has challenged the widely-held belief that international financial markets should be deregulated. The common arguments both for and against free international capital flows are analysed and contrasted. Given the existence of various distortions and market failures in the global economy, there is a case for some degree of control. The extension a...

International Capital Flows

Bubbles and capital flows

This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries. Through this ch...