## _wp0431

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---

### Introduction
- Among the most important issues in international macroeconomics are those pertaining to the long-term dynamics of open economies.
- In a closed economy context, the Ramsey-Cass-Koopmans model provides a starting point for analysis, in a setting characterized by rational, forward-looking households and profit-maximizing firms, operating in a perfectly competitive environment with flexible prices.
- In the model, transitional dynamics are driven primarily by capital accumulation, while exogenous technological progress accounts for long-term growth.
- A straightforward extension of the Ramsey model to the open economy case under the assumption of perfect capital mobility eliminates all interesting dynamics (Barro and Sala-ì-Martin (1995)).
- If the domestic interest rate equals the world interest rate throughout transition, consumption of tradables would remain constant over time for a large class of additively separable utility functions in the tradable good.

### Friction mechanism introduced in this paper
- Core formulation and motivation:
  - The cost of foreign borrowing increases with the amount of new borrowing in any given period.
  - Making a foreign loan requires expending scarce outside resources; the cost of those resources is higher if demand for them (the amount of new lending) increases.
  - The friction resembles investment adjustment costs but is interpreted as a cost of “installing” a new loan rather than installing capital equipment.
- Purpose of focus:
  - Highlight limits to capital mobility even absent institutional restrictions.
  - Generate realistic dynamics of the interest rate differential.
- Key implication:
  - Breaking interest rate parity allows for evolving interest rate differentials during transition and nondegenerate dynamics for consumption, capital accumulation, and relative prices.

### Friction mechanism — formal assumptions and short-cuts
- Cost of doing business with an emerging economy partner is higher due to geographic remoteness, language/culture differences, scarce information, and uncertain enforcement.
- Cost of extending a new loan requires an outside factor X, resident in the outside world:
  - Individual lender: xfθ=
  - Aggregate: XFθ=
- Supply of factor X is proportional to its price: XPξ=.
- Cost to an individual lender of lending one dollar equals bF(t), where F(t) is the total net flow of foreign capital at time t and b is a positive constant.
- Competition among foreign investors equates cost of lending one dollar and the present discounted value of future revenues at world interest rate ρ:
  - () 1()() st t bF tr s eds ρ −− += ∫
  - This implies the differential equation: ()rbFF ρρ−= − .
- Shorter loan-maturity shortcut (short-sighted formulation):
  - rBFρ−=,
  - where B is the ratio of b to the loan maturity.
- Friction is linked to flows (net new lending F) rather than directly to the stock of debt D.

### Model setup: two-sector open economy growth model
- Agents and endowments:
  - Infinitely lived optimizing consumers; identical agents; inelastically supply L units of labor.
- Sectors:
  - Tradables (numeraire) and nontradables.
- Tradables production:
  - (, )(), TTT T K QFKL Lfk    k L ==   ≡.
  - Profit maximization conditions:
    - () K fkr ′ =
    - () () fkkfk w ′ − = ,
    - where rK is the rental rate of capital and w is the wage rate.
- Nontradables production:
  - Linear technology: NN QL=.
  - Zero profit in nontradables implies N pw = .
  - Wage rate w plays the role of the real exchange rate (price of nontradables in terms of tradables).
- Capital is tradable (price of one unit of capital is one).
- Household preferences and timing:
  - Households maximize: 0 (   log(1) log) t TN Uccedt ρ αα ∞ − = + − ∫.
  - Rate of time discounting equals the world interest rate ρ.
- Returns equality:
  - K rr δ − = .
- Net asset position:
  - A = K − D (no net bonds in equilibrium across identical agents).
- Budget constraint:
  - TN ArAwLc  wc = + − − .
- Intratemporal and intertemporal optimality:
  - 1 T N c wc α α = −
  - T T c r c ρ = −  .
- Total value of consumption basket in tradable terms:
  - TN cc  wc = + ; T cc α = ; () 1 N w cc α = − .
- Link between capital intensity, capital stock, and consumption:
  - k = k(K,c), increasing in both K and c; () () 1 TN NN KK   K   KK k c LLL LQ Lc L wk α ==   =   =   = − − − − .

### Short-sighted friction: system and dynamics
- Short-sighted system (combining household/firms conditions with rBFρ−= and DF=):
  - BFrρ=−
  - c r c ρ = − 
  - DF = 
  - KDrKrDwLc − = − + − 
  - () () () fk   r fkkfk w δ ′ = + ′ − =
  - () 1 K k c L w α = − − −
- Implication: c BD c =    (so (ln c − BD) is constant). With D(0) = 0:
  - 0 1 ln c D Bc  =   .
- Reduced system of two differential equations (with k = k(K,c)):
  - () c rk c ρ = − 
  - () ()   ()() 0 1 ln rk c KrkK  rkwkL c BBc ρ −  = + − + −   
- Phase diagram and steady state properties:
  - Locus 0 c =  is a downward sloping straight line where () () , fk K c ρ δ ′ = +.
  - Locus 0 K =  slope complicated; for B = ∞ (zero capital mobility) slope is positive.
  - For positive B, system has a saddle point equilibrium; stable arm leads to steady state.
- Linearization around steady state:
  - The determinant of the linearization matrix equals () ** * kk    k cf  k KcK Bc ρ ρ ∂∂  ′′ ++ ∂∂ ∂ , which is negative — confirming saddle-path stability.
- Transition implications starting from K lower than steady state:
  - Capital stock rises (both per capita and per worker in tradable sector).
  - Interest rate declines.
  - Wage rate increases.
  - Real exchange rate appreciates.
  - Consumption of tradables and total consumption in tradable terms increase.
- Effect of B (degree of friction/capital mobility):
  - Any degree of friction including closed capital account yields qualitatively similar behavior (except B = 0 frictionless jump case).
  - Less friction (smaller b, smaller B) → smaller wedge between domestic and world interest rate → flatter consumption profile → faster capital accumulation.
- Consumers’ solution (taking r and w as given):
  - () () () 0 0 exp t ct    cr s ds ρ   = −     ∫ , where () () 0 00 0 t rs ds cKLw tedt ρ ∞ −   ∫   = +       ∫ .
- In economies with initial k below steady state, openness raises wages and lowers interest rates at any point in time relative to closed economy → initial consumption higher.
- Steady state consumption and relationships:
  - Steady state consumption: () **** c K D w L ρ = − + .
  - Using () * ** * 1 c K k L w α  − = −    , derive:
    - () () *** * * 11 kL DwL c k w ρ ρ α − + = + −
    - () () ** * ** 1 1 wLD K k wk αρ αρ + − = + −
- Comparative statics (short-sighted):
  - Lower B (easier access) → more debt in steady state; lower steady state consumption; higher steady state stock of capital and output of tradables.
  - Steady state values of interest rate, capital intensity in tradables, wage rate, and relative price of nontradables do not depend on B.

### Far-sighted friction: system and dynamics
- Far-sighted foreign investors compare cost bF(t) with present discounted value of interest stream:
  - () rbF F ρ ρ − = −  , equivalently r FF b ρ ρ − = −  .
- Replaces short-sighted equation BFrρ−= in the model; rest remains same.
- Dynamic relationship:
  - 1 c FD bc ρ  = −      .
  - Implies 1 ln FD c b ρ  − +   must be constant over time.
  - In steady state (flows cease, D → D*):
    - * * 1 ln F c D D b c ρ ρ  = + +   .
- Reduced system of three differential equations:
  - () cr   c ρ = − 
  - r FF b ρ ρ − = − 
  - * * 1 ln F c K Fr Kw L c r D b c ρ ρ   = + + − − ++     
- Linearization near steady state:
  - Laws of motion for c and K do not depend on F in the vicinity of the steady state (F enters K equation in second order).
  - Determinant of c-K subsystem: () ** * 1 1 kk cf  k Kc bc ρ  ∂∂   ′′ ++   ∂∂     , which is negative → saddle path stability.
- Dynamics along the saddle path:
  - k, K, w, and D increase; r and F decline; r → ρ and F → 0 as steady state reached.
- Comparative statics (far-sighted mirror short-sighted):
  - Easier access accelerates transition, raises steady state debt and capital stock, lowers steady state consumption.
  - Steady state values of capital-labor ratio in tradables, wage rate, real exchange rate, and interest rate unaffected by friction magnitude.

### Comparative findings, scenarios, and key implications
- General transitional pattern for an emerging economy starting below steady state:
  - Capital accumulation increases.
  - Debt increases.
  - Consumption increases along transition (but steady state consumption lower with greater access).
  - Wage rate increases.
  - Interest rate declines toward world rate ρ.
  - Relative price of the more capital intensive good goes down (real appreciation of nontradables in terms of tradables via Balassa-Samuelson channel).
- Friction specification highlights:
  - Interest differential tied to the flow of new external financing (F) rather than the stock of debt D.
  - As country matures and flows decline, interest premium falls — opposite implication to stock-based premium models.
- Role of capital mobility (B or b):
  - Lower frictions (lower B or b) → faster convergence to steady state; higher steady state K and D; lower steady state consumption.
  - Steady state r, k (capital intensity in tradables), w, and relative price of nontradables unaffected by friction magnitude.
- Mechanism analogy:
  - The friction is analogous to investment adjustment costs but applied to "installing" a loan rather than equipment.

### Conclusion
- The paper introduces a microfounded capital market friction where the cost of contracting a new loan is proportional to net capital inflows and rollover is costless.
- Embedding this mechanism in a two-sector open economy growth model yields nondegenerate dynamics of interest rates and other macro variables while remaining tractable and plausible.
- Key outcomes:
  - Easier foreign finance speeds capital accumulation and convergence.
  - Easier foreign finance increases steady state stocks of capital and debt.
  - Easier foreign finance lowers steady state consumption.
  - Capital accumulation in tradables generates Balassa-Samuelson–type real appreciation via relative capital intensity.
- The model is amenable to extensions (incorporating money, anticipated capital account opening, or different tradable/nontradable capital intensities).

*Source: _wp0431*

### 1.     Phase     Diagram ...............................................................................................

### 1.     Phase     Diagram

### Introduction
- Among the most important issues in international macroeconomics are those pertaining to the long-term dynamics of open economies.
- In a closed economy context, the Ramsey-Cass-Koopmans model provides a starting point for analysis, in a setting characterized by rational, forward-looking households and profit-maximizing firms, operating in a perfectly competitive environment with flexible prices.
- In the model, transitional dynamics are driven primarily by capital accumulation, while exogenous technological progress accounts for long-term growth.
- As indicated in Barro and Sala-ì-Martin (1995), a straightforward extension of the Ramsey model to the open economy case under the assumption of perfect capital mobility eliminates all interesting dynamics.

### Literature and approaches to generate open-economy dynamics
- Four principal ways of introducing dynamics into the behavior of an open economy are described:
  - Adapting Blanchard’s (1985) finite horizon model to an open economy setting, which produces some transitional dynamics for consumption, capital stock and output but where the capital stock and output still jump immediately to their steady states.
  - Imposing constraints on the amount that can be borrowed abroad (examples: Cohen and Sachs (1986); Barro, Mankiw, and Sala-ì-Martin (1995)).
  - Introducing adjustment costs for investment (Brock, 1988).
  - Assuming that capital goods are nontradable (Murphy, 1986).
- While each of these approaches breaks the link between being able to borrow in international credit markets and the ability to invest at an infinite rate, the domestic interest rate in these models either cannot be defined at all or equals the world interest rate throughout the course of transition.
- Immediate interest rate convergence has not been the experience of emerging economies.
- A constant interest rate (in terms of tradables) implies a constant marginal utility of consuming the tradable good. As a result, the consumption of tradables would remain constant over time, even as the economy accumulates capital, for a large class of utility functions that are additively separable in the tradable good.
  - This, of course, is also true of models that feature only one consumption good, unless utility also depends in a nonseparable way on leisure.

### Friction mechanism introduced in this paper
- The paper introduces a realistic and tractable friction mechanism that breaks interest rate parity and allows for nondegenerate dynamics in consumption, capital accumulation, and the adjustment of relative prices.
- Core formulation and motivation:
  - The cost of foreign borrowing increases with the amount of new borrowing in any given period.
  - This reflects that making a foreign loan requires expending resources that are in scarce supply, and the cost of those resources is higher if the demand for them (the amount of new lending) increases.
  - The friction is similar in spirit to adjustment cost, but rather than being the cost of installing a unit of capital equipment, it is a cost of “installing” a new loan.
  - In reality this mechanism combines with other factors, such as investment adjustment costs and nontradability of certain capital goods, to slow down the convergence process.
- Purpose of focus:
  - The paper focuses on the capital market friction to highlight limits to capital mobility even in the absence of institutional restrictions and to generate realistic dynamics of the interest rate differential.

### Implications and paper organization
- Implications derived or signaled:
  - Breaking interest rate parity allows for evolving interest rate differentials during transition.
  - Nondegenerate dynamics for consumption, capital accumulation, and relative prices become feasible within a tractable open-economy framework.
- Organization:
  - The next section introduces the friction mechanism, explaining the motivation, suggesting a specific formulation, and deriving implications.

*Source: _wp0431 - 1.     Phase     Diagram ...............................................................................................*

### Section III embeds this mechanism in a two-sector, infinite horizon, open economy model of

### _wp0431 - Section III embeds this mechanism in a two-sector, infinite horizon, open economy model of

### Friction mechanism
- Assumes the cost of doing business with an emerging economy partner is higher than with domestic clients because of geographic remoteness, differences in language and business culture, scarcity of information, and uncertain enforcement.
- Cost of extending a new loan requires a certain outside factor x, resident in the outside world:
  - Individual lender: xfθ=
  - Aggregate: XFθ=
- Supply of factor X is proportional to its price: XPξ=.
- The cost to an individual lender of lending one dollar equals bF(t), where F(t) is the total net flow of foreign capital at time t and b is a positive constant.
- Competition among foreign investors equates the cost of lending one dollar and the present discounted value of future revenues at world interest rate ρ:
  - ()
    1()()
    st
    t
    bF  tr  s  eds
    ρ
    ∞
    −−
    +=
    ∫
- This implies the differential equation: ()rbFF ρρ−=   − .
- Shorter loan-maturity shortcut (short-sighted formulation):
  - rBFρ−=,
  - where B is the ratio of b to the loan maturity.
- Friction is linked to flows (net new lending) rather than directly to the stock of debt.

### Model setup: two-sector open economy growth model
- Agents: infinitely lived optimizing consumers; identical agents; inelastically supply L units of labor.
- Sectors: tradables (numeraire) and nontradables.
- Tradables: produced combining capital and labor with neoclassical CRS technology:
  - (, )(), TTT T K QFKL Lfk    k L ==   ≡.
  - Profit maximization conditions:
    - () K fkr ′ = 
    - () () fkkfk w ′ − = ,
    - where rK is the rental rate of capital and w is the wage rate.
- Nontradables: produced using only labor (linear technology): NN QL=.
  - Zero profit in nontradables implies N pw = .
  - Wage rate w plays the role of the real exchange rate (price of nontradables in terms of tradables).
- Capital is tradable (price of one unit of capital is one).
- Households maximize:
  - 0 (   log(1) log) t TN Uccedt ρ αα ∞ − = + − ∫.
  - Rate of time discounting equals the world interest rate ρ.
- Returns equality between capital and bond holdings:
  - K rr δ − = .
- Net asset position A = K − D (no net bonds in equilibrium across identical agents).
- Budget constraint: TN ArAwLc  wc = + − − .
- Intratemporal and intertemporal conditions:
  - 1 T N c wc α α = −
  - T T c r c ρ = −  .
- Total value of consumption basket in tradable terms: TN cc  wc = + ; T cc α = ; () 1 N w cc α = − .
- Link between capital intensity, capital stock, and consumption (implicit k = k(K,c), increasing in both K and c):
  - ()
    ()
    1
    TN NN KK   K   KK k c LLL LQ Lc L wk α ==   =   =   = − − − − .

### Short-sighted friction: system and dynamics
- Short-sighted system (combining household/firms conditions with rBFρ−= and DF=):
  - BFrρ=−
  - c r c ρ = − 
  - DF = 
  - KDrKrDwLc − = − + − 
  - () () () fk   r fkkfk w δ ′ = + ′ − =
  - () 1 K k c L w α = − − −
- Implies c BD c =    (so (ln c − BD) is constant). With D(0) = 0:
  - 0 1 ln c D Bc  =   .
- Reduced system of two differential equations (with k = k(K,c)):
  - () c rk c ρ = − 
  - () ()   ()() 0 1 ln rk c KrkK  rkwkL c BBc ρ −  = + − + −   
- Phase diagram and steady state properties:
  - Locus 0 c =  is a downward sloping straight line where () () , fk K c ρ δ ′ = +.
  - Locus 0 K =  slope complicated; for B = ∞ (zero capital mobility) slope is positive.
  - For positive B, system has a saddle point equilibrium; stable arm leads to steady state.
- Linearization around steady state yields a matrix whose determinant equals:
  - () ** * kk    k cf  k KcK Bc ρ ρ ∂∂  ′′ ++ ∂∂ ∂ , which is negative — confirming saddle-path stability.
- Transition implications starting from K lower than steady state:
  - Capital stock rises (both per capita and per worker in tradable sector).
  - Interest rate declines.
  - Wage rate increases.
  - Real exchange rate appreciates.
  - Consumption of tradables and total consumption in tradable terms increase.
- Effect of B (degree of friction/capital mobility):
  - Any degree of friction including closed capital account yields qualitatively similar behavior (except B = 0 frictionless jump case).
  - Less friction (smaller b, smaller B) → smaller wedge between domestic and world interest rate → flatter consumption profile → faster capital accumulation.
  - Consumers’ solution (taking r and w as given):
    - () () () 0 0 exp t ct    cr s ds ρ   = −     ∫ , where () () 0 00 0 t rs ds cKLw tedt ρ ∞ −   ∫   = +       ∫ .
  - In economies with initial k below steady state, openness raises wages and lowers interest rates at any point in time relative to closed economy → initial consumption higher.
- Steady state consumption and relationships:
  - Steady state consumption: () **** c K D w L ρ = − + .
  - Using () * ** * 1 c K k L w α  − = −    , derive:
    - () () *** * * 11 kL DwL c k w ρ ρ α − + = + −
    - () () ** * ** 1 1 wLD K k wk αρ αρ + − = + −
- Comparative statics:
  - Lower B (easier access) → more debt in steady state; lower steady state consumption; higher steady state stock of capital and output of tradables (since lower consumption reduces demand for nontradables and shifts labor to tradables).
  - Steady state values of interest rate, capital intensity in tradables, wage rate, and relative price of nontradables do not depend on B.

### Far-sighted friction: system and dynamics
- Far-sighted foreign investors compare cost bF(t) with present discounted value of interest stream:
  - () rbF F ρ ρ − = −  , equivalently r FF b ρ ρ − = −  .
- Replaces short-sighted equation BFrρ−= in the model; rest remains same.
- Dynamic relationship: 1 c FD bc ρ  = −      .
  - Implies 1 ln FD c b ρ  − +   must be constant over time.
  - In steady state (flows cease, D → D*):
    - * * 1 ln F c D D b c ρ ρ  = + +   .
- Reduced system of three differential equations:
  - () cr   c ρ = − 
  - r FF b ρ ρ − = − 
  - * * 1 ln F c K Fr Kw L c r D b c ρ ρ   = + + − − ++     
- Linearization near steady state:
  - Laws of motion for c and K do not depend on F in the vicinity of the steady state (F enters K equation in second order).
  - Determinant of c-K subsystem:
    - () ** * 1 1 kk cf  k Kc bc ρ  ∂∂   ′′ ++   ∂∂     , which is negative → saddle path stability.
- Dynamics along the saddle path:
  - k, K, w, and D increase; r and F decline; r → ρ and F → 0 as steady state reached.
- Comparative statics mirror short-sighted case:
  - Easier access accelerates transition, raises steady state debt and capital stock, lowers steady state consumption.
  - Steady state values of capital-labor ratio in tradables, wage rate, real exchange rate, and interest rate unaffected by friction magnitude.

### Comparative findings, scenarios, and key implications
- General transitional pattern for an emerging economy starting below steady state:
  - Capital accumulation increases.
  - Debt increases.
  - Consumption increases along transition (but steady state consumption lower with greater access).
  - Wage rate increases.
  - Interest rate declines toward world rate ρ.
  - Relative price of the more capital intensive good goes down (real appreciation of nontradables in terms of tradables via Balassa-Samuelson channel).
- Friction specification highlights:
  - Interest differential tied to the flow of new external financing (F) rather than the stock of debt D.
  - As country matures and flows decline, interest premium falls — opposite implication to stock-based premium models.
- Role of capital mobility (B or b):
  - Lower frictions (lower B or b) → faster convergence to steady state; higher steady state K and D; lower steady state consumption.
  - Steady state r, k (capital intensity in tradables), w, and relative price of nontradables unaffected by friction magnitude.
- Mechanism is analogous to investment adjustment costs but applied to "installing" a loan rather than equipment.

### Conclusion
- Introduces a microfounded capital market friction where cost of contracting a new loan is proportional to net capital inflows and rollover is costless.
- Embedding this mechanism in a two-sector open economy growth model yields nondegenerate dynamics of interest rates and other macro variables; model is tractable and plausible.
- Key outcomes: easier foreign finance speeds capital accumulation and convergence, increases steady state stocks of capital and debt, and lowers steady state consumption; capital accumulation in tradables generates Balassa-Samuelson–type real appreciation via relative capital intensity.
- Model amenable to extensions (incorporating money, anticipated capital account opening, or different tradable/nontradable capital intensities).

*Source: _wp0431 - Section III embeds this mechanism in a two-sector, infinite horizon, open economy model of (PDF).*

### REFERENCES

### REFERENCES

### Economic growth and capital mobility
- Barro, Robert J., and Xavier Sala-ì-Martin, 1995, Economic Growth (New York: McGraw-Hill).
- Barro, Robert J., N. Gregory Mankiw, and Xavier Sala-ì-Martin, 1995, “Capital Mobility in Neoclassical Models of Growth,” American Economic Review, Vol. 85, pp. 103–15.
- Brock, Philip L., 1988, “Investment, the Current Account, and the Relative Price of Non-Traded Goods in a Small Open Economy,” Journal of International Economics, Vol. 24, pp. 235–53.
- Brock, Philip L., 1994, “Economic Development and the Relative Price of Nontradables: Global Dynamics of the Krueger-Deardorff-Leamer Model,” Review of International Economics, Vol. 2, pp. 268–83.
- Brock, Philip L., and Stephen J. Turnovsky, 1994, “The Dependent-Economy Model with Both Traded and Nontraded Capital Goods,” Review of International Economics, Vol. 2, pp. 306–25.
- Obstfeld, Maurice, and Kenneth Rogoff, 1996, Foundations of International Macroeconomics, (Cambridge, Massachusetts: MIT Press).

### Nontraded goods, relative prices, and sectoral shocks
- Bhagwati, Jagdish, 1984, “Why Are Services Cheaper in Poor Countries?” Economic Journal, Vol. 94, pp. 279–86.
- Murphy, Robert G., 1986, “Productivity Shocks, Non-Traded Goods, and Optimal Capital Accumulation,” European Economic Review, Vol. 30, pp. 1081–95.
- Flemming, J.S., 1982, “Comment on J.P. Neary and D.D. Purvis, ‘Sectoral Shocks in a Dependent Economy: Long-Run Adjustment and Short-Run Accommodation,’” Scandinavian Journal of Political Economy, Vol. 84, pp. 255–57.
- Kravis, Irving B., and Robert E. Lipsey, 1983, “Toward an Explanation of National Price Levels,” Princeton Studies in International Finance, 52 (Princeton: International Finance Section, Department of Economics, Princeton University).

### Real exchange rate, exchange rate misalignment, and purchasing power parity
- Lee, Jaewoo, and Man-Keung Tang, 2003, “Does Productivity Growth Lead to Appreciation of the Real Exchange Rate?” IMF Working Paper 03/154 (Washington: International Monetary Fund).
- Montiel, Peter J., 1999, “Determinants of the Long-Run Equilibrium Real Exchange Rate: An Analytical Model,” in Exchange Rate Misalignment: Concepts and Measurement for Developing Countries, ed. by Lawrence E. Hinkle and Peter J. Montiel (New York: Oxford University Press).
- Rogoff, Kenneth, 1996, “The Purchasing Power Parity Puzzle,” Journal of Economic Literature, Vol. 34, pp. 647–68.

### Debt, deficits, and external debt risk
- Blanchard, Olivier, 1985, “Debt, Deficits, and Finite Horizons,” Journal of Political Economy, Vol. 93, pp. 223–47.
- Cohen, Daniel, and Jeffrey Sachs, 1986, “Growth and External Debt under Risk of Debt Repudiation,” European Economic Review, Vol. 30, pp. 526–60.

### Balance of payments, stages, and capital flows in transition economies
- Fischer, Stanley, and Jacob A. Frenkel, 1974, “Economic Growth and Stages of the Balance of Payments,” in Trade, Stability and Macroeconomics: Essays in Honor of Lloyd A. Metzler, ed. by G. Horwich and Paul A. Samuelson (New York: Academic Press).
- Lipschitz, Leslie, Timothy Lane, and Alex Mourmouras, 2002, “Capital Flows to Transition Economies: Master or Servant?” IMF Working Paper 02/11 (Washington: International Monetary Fund).

*Source: REFERENCES (page content).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp0431.pdf_