International capital flows

Wincoop, Eric van; Tille, Cédric

doi:10.1016/j.jinteco.2009.11.003

Cited by 236 publications

(162 citation statements)

References 20 publications

Supporting

Mentioning

153

Contrasting

Unclassified

Order By: Relevance

“…The DS method provides readily applicable solution formulas for the zero-order and first-order parts of an approximation to portfolio holdings, and has, because of its user-friendliness become widely used in recent contributions in macroeconomics. Other noteworthy contributions to solving portfolios with local approximation methods are Samuelson (1970), Judd and Guu (2001), Tille and van Wincoop (2007), and Evans and Hnatkovska (2005)). 9 The DS perturbation solution method is straightforward to implement and in simple settings it is possible to obtain an analytic characterization of the approximate portfolio solution, which can be helpful for building intuition for the mechanisms at play.…”

Section: Local Solution Methodsmentioning

confidence: 99%

“…The zero-order (steady state) solution of portfolio holdings obtained by the DS method is equivalent to the zeroorder portfolio solution obtained by Judd and Guu's (2001) bifurcation approach to solving portfolios -yet, the Judd and Guu approach is not directly applicable to a dynamic setting. The DS solution method delivers an equivalent solution (for zero-and first-order portfolio holdings) as the iterative method by Tille and van Wincoop (2007). Finally, the DS method is quite different from Evans and Hnatkovska (2005), who combine perturbation methods with continuous-time approximations.…”

Section: Local Solution Methodsmentioning

confidence: 99%

“…The DS method, based on the earlier work by Samuelson (1970) and Judd and Guu (2001), together with the noteworthy contributions by Tille and van Wincoop (2007) and Hnatkovska (2005, 2012) have been path-breaking in many aspects: for most of their existence, general equilibrium international macro models have ignored portfolios altogether. 1 Typically, models featured either incomplete financial markets with only one asset or complete financial markets.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

International portfolios: A comparison of solution methods

Rabitsch

Stepanchuk

Tsyrennikov

2015

Journal of International Economics

View full text Add to dashboard Cite

We compare the performance of the perturbation-based (local) portfolio solution method of Sutherland (2010a, 2011) with a global solution method. We find that the local method performs very well when the model is designed to capture stylized macroeconomic facts and countries/agents are symmetric, i.e. when the latter have similar size, face similar risks and trade assets with similar risk properties. It performs less satisfactory when the agents engaged in financial trade are asymmetric. The global solution method performs substantially better when the model is parameterized to match the observed equity premium, a key stylized finance fact.

show abstract

Section: Local Solution Methodsmentioning

confidence: 99%

Section: Local Solution Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

International portfolios: A comparison of solution methods

Rabitsch

Stepanchuk

Tsyrennikov

2015

Journal of International Economics

View full text Add to dashboard Cite

show abstract

“…Tille and Van Wincoop (2008) construct a model where retrenchment can take place if foreign investors are less informed than domestic investors, and crises increase this information asymmetry. Tille and Van Wincoop (2010) construct a dynamic portfolio choice model where there is time-variation in second moments that affect home and foreign portfolios di¤erently, and if this time variation in second moments is su¢ cient, the model will generate a positive correlation between gross in ‡ows and out ‡ows. 3 From this it seems that an increase in global of country-speci…c risk around the time of a crisis and the tendency for that to drive retrenchment, or a " ‡ight-to-home", seems to explain this observed positive correlation between gross in ‡ows and out ‡ows.…”

Section: Introductionmentioning

confidence: 99%

The Cyclicality of (Bilateral) Capital Inflows and Outflows

Davis

2015

gwp

View full text Add to dashboard Cite

Recent research has shown that gross capital inflows and outflows are positively correlated and highly procyclical. This poses a puzzle since most theory predicts that capital inflows and outflows should be negatively correlated, and while capital inflows should be procyclical, capital outflows should be countercyclical. This previous work has examined the behavior of aggregate capital inflows and outflows (capital flows between a country and the rest of the world). This paper shows that bilateral capital inflows and outflows (flows between a pair of countries) are also positively correlated and strongly procyclical. This empirical finding poses a new puzzle. The data suggests that any model that can explain capital flows at the bilateral level needs to rely on market incompleteness and non-diversification. In addition, the data suggests that this positive correlation and procyclicality is largely the feature of crisis episodes. After controlling for crisis episodes, we find that bilateral capital flows move positively with GDP in the country receiving the capital and co-move negatively in the country sending the capital.

show abstract

“…In particular, this setup does not enter the recent literature on issues of portfolio choice and endogenous non-zero positions (see, e.g. Devereux & Sutherland (2008) and Tille & van Wincoop (2007)). …”

mentioning

confidence: 99%

The Role of Financial Market Structure and the Trade Elasticity for Monetary Policy in Open Economies

Rabitsch¹

2012

J of Money Credit Banking

View full text Add to dashboard Cite

Imperfect international risk sharing and exchange rate volatility matter for how monetary policy should optimally be conducted in an open economy through affecting policymakers’ terms of trade considerations. I study these motives for a classical and long‐standing question in international monetary economics: the size of potential gains from international policy coordination. In a relatively standard model I allow for various degrees of risk sharing by considering different assumptions on international financial markets, and a large region for the crucial parameter of the trade elasticity. When incomplete markets give rise to high volatility of international prices and poor risk sharing—such as in Corsetti, Dedola, and Leduc (2008)—gains from policy coordination are an order of magnitude larger than previous studies, working under the assumptions of complete markets, suggest.

show abstract

International capital flows

Cited by 236 publications

References 20 publications

International portfolios: A comparison of solution methods

International portfolios: A comparison of solution methods

The Cyclicality of (Bilateral) Capital Inflows and Outflows

The Role of Financial Market Structure and the Trade Elasticity for Monetary Policy in Open Economies

Contact Info

Product

Resources

About