Imperfect Capital Mobility in an Open Economy Model of Capital Accumulation
February 1, 2004
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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.
Subject: Capital accumulation, Capital markets, Capital productivity, Consumption, Stocks
Keywords: interest rate, WP
Pages:
19
Volume:
2004
DOI:
Issue:
031
Series:
Working Paper No. 2004/031
Stock No:
WPIEA0312004
ISBN:
9781451845051
ISSN:
1018-5941
