Imperfect Capital Mobility in an Open Economy Model of Capital Accumulation

Author/Editor:

Vladimir Klyuev

Publication Date:

February 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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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