Imperfect Capital Mobility in an Open Economy Model of Capital Accumulation
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Summary:
This paper introduces a tractable capital market friction mechanism that allows a break of the parity between domestic and external interest rates and generates a gradual evolution of capital stock and other macroeconomic variables-in contrast to the instantaneous convergence found in models with interest rate parity. The friction, derived from explicit microfoundations, is such that the cost of new loans is an increasing function of net borrowing.
Series:
Working Paper No. 2004/031
Subject:
Capital accumulation Capital markets Capital productivity Consumption Stocks
English
Publication Date:
February 1, 2004
ISBN/ISSN:
9781451845051/1018-5941
Stock No:
WPIEA0312004
Pages:
19
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