Discussion Paper Details
Please find the details for DP15647 in an easy to copy and paste format below:
Title: Why Does Capital Flow from Equal to Unequal Countries?
Author(s): Sergio de Ferra, Kurt Mitman and Federica Romei
Publication Date: January 2021
Keyword(s): Capital Flows, current account and inequality
Programme Area(s): International Macroeconomics and Finance and Monetary Economics and Fluctuations
Abstract: Capital flows from equal to unequal countries. We document this empirical regularity in a large sample of advanced economies. The capital flows are largely driven by private savings. We propose a theory that can rationalize these findings: more unequal countries endogenously develop deeper financial markets. Households in unequal counties, in turn, borrow more, driving the observed direction of capital flows.
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de Ferra, S, Mitman, K and Romei, F. 2021. 'Why Does Capital Flow from Equal to Unequal Countries?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15647