A Portfolio Theory of International Capital Flows
نویسندگان
چکیده
This paper constructs a model in which the currency composition of national portfolios is an essential element in facilitating capital ows between countries. In a two country environment, each country chooses optimal nominal bond portfolios in face of real and nominal risk. Current account de cits are nanced by increases in domestic currency debt, but balanced by increases in foreign currency credit. This is combined with an evolution of risk-premiums such that the rate of return on the debtor countrys gross liabilities is lower than the return on its gross assets. This ensures stability of the world wealth distribution.
منابع مشابه
Discussion on “gross capital flows Dynamics and crises” by Broner, Didier, Erce, and Schmukler
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