EconStor >
Verein für Socialpolitik >
Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/37209
  
Title:The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions PDF Logo
Authors:Heinemann, Maik
Clemens, Christiane
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Financial Integration and Investment Decisions D9-V1
Abstract:This paper examines the pattern of international capital flows in a two-sector dynamic general equilibrium heterogeneous agent model with financial frictions and idiosyncratic entrepreneurial risk. Countries differ only with respect to the tightness of constraints on the domestic credit market. The results provide an explanation for the 'Lucas paradox', i.e., the empirical observation of capital flowing from poor to rich countries, where lending countries are characterized by tighter domestic constraints. International integration only indirectly mitigates negative output and welfare effects from financial constraints on domestic credit markets. The effects are triggered by adjustments in the real interest rate to global real return. We observe an accumulation-driven rise in the entrepreneurship rate and positive output effects for countries with relatively tight constraints who generally benefit from financial integration. The macroeconomic effects can be adverse for the capital-importing country which may suffer from a decrease in GNP in the integrated economy. The model is calibrated to match standard macro data, entrepreneurship rates, and Gini coefficients from OECD countries.
Subjects:DSGE
financial constraints
financial market integration
international capital flows
heterogeneous agents
occupational choice
JEL:C68
D91
F41
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

Files in This Item:
File Description SizeFormat
VfS_2010_pid_193.pdf429.61 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/37209

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.