Working Paper: NBER ID: w22081
Authors: Nicholas Ford; Charles Yuji Horioka
Abstract: This paper shows that global capital markets cannot, by themselves, achieve net transfers of financial capital between countries and that both the integration of global financial markets as well as the integration of global goods markets are needed to achieve net transfers of capital between countries. Frictions (barriers to mobility) in one or both of these markets can impede net transfers of capital between countries, produce the Feldstein and Horioka (1980) results, and prevent real interest rates from being equalized across countries. Moreover, there is empirical evidence that barriers to the mobility of goods and services are an important obstacle to international capital mobility.
Keywords: No keywords provided
JEL Codes: F21; F32; F36; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| barriers to capital mobility (F20) | impediments in net capital transfers (F21) |
| barriers to the mobility of goods and services (O24) | impediments in net capital transfers (F21) |
| global financial market integration + global goods market integration (F30) | net transfers of financial capital between countries (F21) |
| barriers in either market (L19) | capital mobility (F20) |
| absence of frictions in both markets (D52) | net transfers of capital (F21) |
| barriers to the mobility of goods and services (O24) | high saving-investment correlations (Feldstein-Horioka results) (F32) |