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Financial Integration, Entrepreneurial Risk and Global Imbalances / George-Marios Angeletos, Vasia Panousi.
- Format:
- Book
- Author/Creator:
- Angeletos, George-Marios.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16761.
- NBER working paper series no. w16761
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2011.
- Summary:
- How does financial integration impact capital accumulation, current-account dynamics, and cross-country inequality? We investigate this question within a two-country, general-equilibrium, incomplete-markets model that focuses on the importance of idiosyncratic entrepreneurial risk-- a risk that introduces, not only a precautionary motive for saving, but also a wedge between the interest rate and the marginal product of capital. Our contribution is to show that this friction provides a simple explanation for the emergence of global imbalances, a resolution to the empirical puzzle that capital often fails to flow from the rich or slow-growing countries to the poor or fast-growing ones, and a set of policy lessons regarding the intertemporal costs and benefits of capital-account liberalization.
- Notes:
- Print version record
- February 2011.
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