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Non-Linear Pattern of International Capital Flows

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  • Ly-Dai, Hung

Abstract

We establish one non-linear pattern of international capital flows by building up one two-country OLG economy. With symmetric growth and asymmetric interest rate wedges across countries, net total capital inflows are either decreasing or increasing on productivity growth rate. However, with asymmetric growth and asymmetric wedges, they follow one U-shaped curve by first decreasing and then increasing on growth. The turning point of the curve is built on world average growth rate and wedges. Our proposed model can provide an explanation for inconsistencies between theories (i.e, Lucas paradox, up-hill capital flows, and allocation puzzle) about the pattern of international capital flows.

Suggested Citation

  • Ly-Dai, Hung, 2016. "Non-Linear Pattern of International Capital Flows," MPRA Paper 90236, University Library of Munich, Germany, revised 08 Oct 2018.
    • Handle: RePEc:pra:mprapa:90236
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    References listed on IDEAS

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    Cited by:

    1. Ly Dai Hung & Hoan Nguyen Thi Thuy, 2020. "International capital flows in club of convergence," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(8), pages 1401-1420, November.

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    More about this item

    Keywords

    Allocation Puzzle; Capital Flows; Financial Frictions; Productivity Growth;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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