Financial Development and International Capital Flows

• Main Authors: von Hagen, Jürgen, ZHANG, Haiping
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Capital account liberalization; Financial frictions; Interest-elastic saving; Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1025; https://ink.library.smu.edu.sg/context/soe_research/article/2024/viewcontent/FinDevCapFlow.pdf
• Institution: Singapore Management University

We develop a general equilibrium model with nancial frictions in which internal capital (equity capital) and external capital (bank loans) have di erent rates of return. Financial development raises the rate of return on external capital but has a non-monotonic e ect on the rate of return on interna...