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Title: Sovereigns, Upstream Capital Flows, and Global Imbalances

Author(s): Laura Alfaro, Sebnem Kalemli-Ozcan and Vadym Volosovych

Publication Date: November 2011

Keyword(s): aid/government debt, current account, productivity, puzzles of flows and reserves

Programme Area(s): International Macroeconomics

Abstract: The paper presents new stylized facts on the direction of capital flows. We find (i) international capital flows net of government debt and/or official aid are positively correlated with growth; (ii) sovereign debt flows are negatively correlated with growth only if debt is financed by another sovereign; (iii) public savings are robustly positively correlated with growth as opposed to private savings. Sovereign to sovereign transactions can fully account for upstream capital flows and global imbalances. These empirical facts contradict the conventional wisdom and constitute a challenge for existing theories.

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Bibliographic Reference

Alfaro, L, Kalemli-Ozcan, S and Volosovych, V. 2011. 'Sovereigns, Upstream Capital Flows, and Global Imbalances'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8648