Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227886
Authors: 
Razmi, Arslan
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 2019-20
Abstract: 
Standard open economy macro models with unemployment predict a contractionary short-run effect of international capital inflows. Empirical evidence, on the other hand, often associates such inflows with short-term booms, and developing country policy makers frequently go out of their way to welcome foreign capital. Employing a portfolio balance framework, this paper distinguishes between international financial (i.e., bond) and "real" (i.e., equity) flows to explore the different consequences for capital accumulation that may follow over the medium run. The presence of external economies of scale generates multiple equilibria, and different kinds of capital flows may push investment in one direction or the other for sustained periods of time.
Subjects: 
Capital flows
economies of scale
investment surges
realexchange rate
JEL: 
F21
F32
F43
O11
Document Type: 
Working Paper

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