Non-linear pattern of international capital flows

  • Hung Ly-DaiEmail author
Original Paper


In a two-country OLG model with interest rate wedges capturing financial frictions, international capital flows can follow a non-linear pattern, depicted as a U-shaped curve, by first decreasing and then increasing in growth. The turning point of the curve is determined by the world average growth rate and these interest rate wedges. The model developed in this paper can reconcile different theories (i.e, the implications of the neoclassical growth model, up-hill capital flows, and the allocation puzzle) on the pattern of international capital flows.


International capital flows Productivity growth Financial frictions 

JEL Classification

F15 F36 F43 


Supplementary material

10290_2019_349_MOESM1_ESM.pdf (1.3 mb)
Supplementary material 1 (pdf 1376 KB)


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Copyright information

© Kiel Institute 2019

Authors and Affiliations

  1. 1.Bielefeld Graduate School of Economics and ManagementBielefeldGermany
  2. 2.Paris School of EconomicsParisFrance

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