International Capital Flows And The Lucas Paradox
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International Capital Flows And The Lucas Paradox
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Author : Muhammad Akhtaruzzaman
language : en
Publisher: Springer
Release Date : 2019-06-21
International Capital Flows And The Lucas Paradox written by Muhammad Akhtaruzzaman and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-06-21 with Business & Economics categories.
This book offers a comprehensive analysis of the debates on international capital flows, and presents a new evidence-based answer to the long-standing question of why capital doesn’t tend to flow from rich to poor countries as predicted by standard neoclassical theory – a puzzle known as the Lucas paradox. Further, the book reviews alternative approaches to conventional estimates of the marginal product of capital (MPK) and considers whether these estimates actually help us understand observed international capital flows. A rigorous quantitative approach is subsequently used to provide clear empirical evidence on the determinants of capital flows across borders. The findings of this empirical analysis suggest that generous economic policies on capital account convertibility are more influential than differences in institutional quality in terms of determining international capital flows. In closing, the relative importance of various types of political risk (e.g. expropriation and corruption) is examined. After determining that expropriation risk has one of the greatest effects on foreign direct investment (FDI), the book proposes an appealingly intuitive explanation for the lack of FDI flows to many capital-scarce developing countries.
International Capital Flows And Development
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Author : Mr.Thierry Tressel
language : en
Publisher: International Monetary Fund
Release Date : 2010-10-01
International Capital Flows And Development written by Mr.Thierry Tressel and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-10-01 with Business & Economics categories.
Does capital flow from rich to poor countries? We revisit the Lucas paradox and explore the role of capital account restrictions in shaping capital flows at various stages of economic development. We find that, when accounting for the degree of capital account openness, the prediction of the neoclassical theory is confirmed: less developed countries tend to experience net capital inflows and more developed countries tend to experience net capital outflows, conditional of various countries’ characteristics. The findings are driven by foreign direct investment, portfolio equity investment, and to some extent by loans to the private sector.
A Solution To Two Paradoxes Of International Capital Flow
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Author : Jiandong Ju
language : en
Publisher: INTERNATIONAL MONETARY FUND
Release Date : 2006-07-01
A Solution To Two Paradoxes Of International Capital Flow written by Jiandong Ju and has been published by INTERNATIONAL MONETARY FUND this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-07-01 with Capital movements categories.
International capital flows from rich to poor countries can be regarded as either too low (the Lucas paradox in a one-sector model) or too high (when compared with the logic of factor price equalization in a two-sector model). To resolve the paradoxes, we introduce a non-neoclassical model which features financial contracts and firm heterogeneity. In our model, free patterns of gross capital flow emerge as a function of the quality of the financial system and the level of protection for property rights(i.e., the risk of expropriation. A poor country with an inefficient financial system but a low expropriation risk may simultaneously experience an outflow of financial capital but an inflow of foreign direct investment (FDI), resulting in a small net flow.
International Capital Flows And Development
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Author : Dennis Reinhardt
language : en
Publisher:
Release Date : 2013
International Capital Flows And Development written by Dennis Reinhardt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Why Doesn T Capital Flow From Rich To Poor Countries
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Author : Pádraig Belton
language : en
Publisher: CRC Press
Release Date : 2017-07-05
Why Doesn T Capital Flow From Rich To Poor Countries written by Pádraig Belton and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-05 with Business & Economics categories.
Robert Lucas is known among economists as one of the most influential macroeconomists of recent times – a reputation founded in no small part on the critical thinking skills displayed in his seminal 1990 paper ‘Why Doesn’t Capital Flow from Rich to Poor Countries?’ Lucas’s paper tackles a puzzle in economic theory that has since come to be known as the ‘Lucas paradox,’ and it deploys the author’s brilliant problem solving skills to explain why such an apparent paradox in fact makes sense. Classical economic theory makes a simple prediction of how capital flows between countries: it should, it states, flow from rich to poor countries, because of the law of diminishing returns on capital. Since poor countries have so little capital invested in them, the returns on new investment should be proportionally far better than investment in rich countries. This should mean that investors seeking new opportunities will invest in poorer countries, making capital consistently flow from rich nations to poorer ones. But, problematically, this is not in fact the case. Having defined the problem, Lucas did what any good problem solver would: he looked critically at the criteria involved, and offered a series of possible solutions. Indeed, in just six pages, he puts forward four hypotheses to explain the paradox’s existence. The popularity of his paper, and the influence it has had, are also greatly magnified by careful reasoning embodied in Lucas’s marshalling of evidence and his explanations of the judgements he has made.
Lucas Paradox And Allocation Puzzle
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Author : Sabine Herrmann
language : en
Publisher:
Release Date : 2016
Lucas Paradox And Allocation Puzzle written by Sabine Herrmann and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper examines the Lucas Paradox and the Allocation Puzzle of international capital flows referring to a panel data set of EMU countries and major industrialized and emerging economies. Overall, the results do not provide evidence in favour of the Lucas Paradox and the Allocation Puzzle. Rather, in line with neoclassical expectations, net capital flows are allocated according to income and growth differentials. The 'downhill' flow of capital from rich to poor economies was particularly pronounced in intra-euro area capital flows and after the introduction of the common currency. If we control for the fact that the assumptions of the neoclassical model are not perfectly given in emerging markets, the Lucas Paradox and the Allocation Puzzle can be dismissed for these countries too. However, in periods of financial stress, the neoclassical behaviour of financial flows is to some extent dampened.
International Capital Flows
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Author : Martin Feldstein
language : en
Publisher: University of Chicago Press
Release Date : 2007-12-01
International Capital Flows written by Martin Feldstein and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-01 with Business & Economics categories.
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
Long Term International Capital Movements And Technology
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Author : Mr.Harm Zebregs
language : en
Publisher: International Monetary Fund
Release Date : 1999-09-01
Long Term International Capital Movements And Technology written by Mr.Harm Zebregs and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-09-01 with Business & Economics categories.
This paper reviews the theoretical literature on the question of how long-term international capital movements depend on the international distribution of technology. It focuses on long-term investment flows, as these are more affected by international differences in technologies than short-term financial flows. International capital movements are investigated in the context of various technology specifications, ranging from models with only one common technology to those with multiple and endogenous technologies. The paper demonstrates that the theoretical specification of technology is crucial to the prediction of the size and direction of international capital movements.
Capital Controls And Capital Flows In Emerging Economies
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Author : Sebastian Edwards
language : en
Publisher: University of Chicago Press
Release Date : 2009-02-15
Capital Controls And Capital Flows In Emerging Economies written by Sebastian Edwards and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-02-15 with Business & Economics categories.
Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. In Capital Controls and Capital Flows in Emerging Economies, an esteemed group of contributors examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.
Why Doesn T Capital Flow From Rich To Poor Countries
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Author : Laura Alfaro
language : en
Publisher:
Release Date : 2004
Why Doesn T Capital Flow From Rich To Poor Countries written by Laura Alfaro and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
We examine the role of different explanations for the lack of flows of capital from rich to poor countries - the Lucas paradox - in an empirical framework. Broadly speaking, the theoretical explanations for this paradox include differences in fundamentals affecting the production structure versus capital market imperfections. Our cross-country regressions show that, for the period 1971-1998, institutional quality is the most important causal variable explaining the Lucas paradox. Human capital and asymmetric information do play a role as determinants of capital inflows but these variables cannot fully account for the paradox.