Capital Flows, Investment, and Exchange Rates / Alan C. Stockman, Lars E.O. Svensson.

By:

Stockman, Alan C

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1598.Publication details: Cambridge, Mass. National Bureau of Economic Research 1985.Description: 1 online resource: illustrations (black and white)Subject(s):

F - International Economics

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Abstract: This paper incorporates international capital flows into a two-country, monetary-general-equilibrium model of asset prices with investment and production. We use the model to calculate theoretical covariances between investment, the current account, the exchange rate, and the terms of trade.These covariances depend upon the coefficient of relative risk-aversion, the magnitude and sign of a country's net international indebtedness, other properties of tastes and technologies, and the stochastic processes on disturbances to productivity and monetary growth rates. International capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets. The dynamic, stochastic relations between capital flows, exchange rates, investment, and the terms of trade are critically dependent on optimal portfolio allocations and the stochastic behavior of asset prices on international financial markets.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w1598 (Browse shelf(Opens below))	Not For Loan

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April 1985.

This paper incorporates international capital flows into a two-country, monetary-general-equilibrium model of asset prices with investment and production. We use the model to calculate theoretical covariances between investment, the current account, the exchange rate, and the terms of trade.These covariances depend upon the coefficient of relative risk-aversion, the magnitude and sign of a country's net international indebtedness, other properties of tastes and technologies, and the stochastic processes on disturbances to productivity and monetary growth rates. International capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets. The dynamic, stochastic relations between capital flows, exchange rates, investment, and the terms of trade are critically dependent on optimal portfolio allocations and the stochastic behavior of asset prices on international financial markets.