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New estimates of international capital mobility for select OECD economies

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  • Makin, Anthony J.
  • Ratnasiri, Shyama

Abstract

This paper offers a new perspective on the meaning and measure of international capital mobility (ICM), contributing to the literature in several ways. Using an extended international loanable funds framework, it reconciles traditional interest parity (IP) measures of ICM with the original Feldstein-Horioka measure. It proposes a novel macro-oriented approach to estimate the degree of ICM. Using quarterly data for the period 2000–2020 for select OECD economies, the study found that ICM is near perfect when capital inflows finance private investment, government spending, and consumption. Interest differentials, though significant, contribute minimally to explaining capital inflows, consistent with very high ICM for these economies.

Suggested Citation

  • Makin, Anthony J. & Ratnasiri, Shyama, 2023. "New estimates of international capital mobility for select OECD economies," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 127-138.
    • Handle: RePEc:eee:reveco:v:86:y:2023:i:c:p:127-138
    DOI: 10.1016/j.iref.2023.03.006
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    More about this item

    Keywords

    International capital mobility; Interest parity; Loanable funds; OECD economies;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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