Can a liberalization of capital outflows increase net capital inflows?

Article Abstract:

Liberalization of capital outflows can actually increase net capital inflows, as exemplified in various economic trends in Britain, Italy and New Zealand. A theoretical model designed to explain the rationale behind the concept holds that liberalizing capital outflows actually result in the reduction of the degree of irreversibility associated with the decision to make investment. This, on the other hand, lowers the option value of waiting which triggers the increase of the reduction of minimum repatriation period.

Economics, Research and Development in the Social Sciences and Humanities, Prices and rates, Foreign exchange, Foreign exchange rates

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Animal spirits, investment and international capital movements

Article Abstract:

A model of investment and capital movements in and out of developing countries is presented. The standard dynamic optimizing model takes into account fiscal increasing returns to domestic capital. Multiple steady states and surprising dynamic behavior may be observed in the resulting system. Furthermore, the selection of equilibrium on which the economy converges relies in part on initial conditions and expectations. A limit cycle may be seen around one of the welfare-inferior equilibria.

Models, Finance, Investments, Developing countries

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