Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171944
Authors: 
Schroth, Josef
Year of Publication: 
2016
Series/Report no.: 
Bank of Canada Staff Working Paper 2016-53
Abstract: 
Foreign direct investment inflows are positively related to growth across developing countries - but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects. In my model, fastgrowing developing countries increase their holdings of safe assets, which creates net capital outflows despite inflows of foreign direct investment. The world risk-free interest rate falls as a result, and slow-growing developing countries reduce their holdings of safe assets, which creates net capital inflows despite outflows of foreign direct investment.
Subjects: 
Foreign reserves management
Interest rates
International financial markets
JEL: 
E13
E21
F43
Document Type: 
Working Paper

Files in This Item:
File
Size
381.99 kB





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