International Capital Flows, External Assets, and Output Volatility

Konferenzbeitrag

This paper proposes a new perspective on international capital flows and countries' long-run external asset position. Cross-sectional evidence for 84 developing countries shows that over the last three decades countries that have had on average higher volatility of output growth: (1) accumulated higher external assets in the long-run and (2) experienced more procyclical capital outflows over the business cycle than those countries with a same growth rate but a more stable output path. We explain this finding with a stochastic real business cycle growth model in which higher uncertainty of expected income increases households' precautionary savings. In the model, the combination of income risk and the precautionary savings motive leads to procyclical capital outflows at business cycle frequency and a higher long-run external asset position.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: International Finance ; No. D21-V3

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; International Business Cycles

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krause, Michael ; Hoffmann, Mathias ; Tillmann, Peter
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100508
• Last update: 10.03.2025, 11:44 AM CET