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Capital flows to developing countries : is there an allocation puzzle? / by Josef Schroth.FB3-5/2016-53E-PDF

"Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit indeveloping countries together with general equilibrium effects. In my model, fast-growing developing countries increase their holdings of safe assets, which creates net capital outflows despite inflows of foreign direct investment. The world risk-free interest rate falls as a result, and slow-growing developing countries reduce their holdings of safe assets, which creates net capital inflows despite outflows of foreign direct investment"--Abstract.

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Publication information
Department/Agency
  • Bank of Canada.
TitleCapital flows to developing countries : is there an allocation puzzle? / by Josef Schroth.
Series title
  • Staff Working Paper, 1701-9397 ; 2016-53
Publication typeMonograph - View Master Record
Language[English]
FormatDigital text
Electronic document
Note(s)
  • "November 2016."
  • Includes bibliographical references.
  • Abstract in French.
Publishing information
  • [Ottawa] : Bank of Canada, c2016.
Author / Contributor
  • Schroth, Josef.
Descriptionii, 21 p.
Catalogue number
  • FB3-5/2016-53E-PDF
Subject terms
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