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Capital Flows and Moral Hazard

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  • Viktor Tsyrennikov

    (NYU)

Abstract

I solve for the optimal (state-contingent) contract and find that moral hazard friction is sufficient to explain capital outflows in low output states –- a defining feature of the emerging markets business cycles. On the other hand, the model that also includes limited enforcement is inconsistent with this fact. The model with moral hazard also performs well in explaining quantitative properties of Argentina's business cycle.

Suggested Citation

  • Viktor Tsyrennikov, 2007. "Capital Flows and Moral Hazard," 2007 Meeting Papers 455, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:455
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    Cited by:

    1. Koralai Kirabaeva & Assaf Razin, 2009. "Composition of International Capital Flows: A Survey," NBER Working Papers 15599, National Bureau of Economic Research, Inc.
    2. Koralai Kirabaeva & Assaf Razin, 2010. "Composition of Capital Flows: A Survey," NBER Working Papers 16492, National Bureau of Economic Research, Inc.

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