Sovereigns, Upstream Capital Flows, and Global Imbalances

Alfaro, Laura; Kalemli-Ozcan, Sebnem; Volosovych, Vadym

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Sovereigns, Upstream Capital Flows, and Global Imbalances

CEPR Discussion Paper No. DP8648

92 Pages Posted: 24 Nov 2011

See all articles by Laura Alfaro

Vadym Volosovych

Erasmus University Rotterdam (EUR); Tinbergen Institute

There are 4 versions of this paper

Date Written: November 2011

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.

Keywords: aid/government debt, current account, productivity, puzzles of flows, reserves

JEL Classification: F21, F41, O1

Suggested Citation: Suggested Citation

Alfaro, Laura and Kalemli-Ozcan, Sebnem and Volosovych, Vadym, Sovereigns, Upstream Capital Flows, and Global Imbalances (November 2011). CEPR Discussion Paper No. DP8648, Available at SSRN: https://ssrn.com/abstract=1964138