Sovereigns, upstream capital flows, and global imbalances
By: Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych
Contributors: Kalemli-Ozcan, Sebnem, author; Volosovych, Vadym, author; Harvard Business School
Edition: Revised edition
Series: Working paper / Harvard Business School -- 12-009; Working paper (Harvard Business School) -- 12-009.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 51
Description: We construct measures of net private and public capital flows for a large cross-section of developing countries considering both creditor and debtor side of the international debt transactions. Using these measures, we demonstrate that sovereign-to-sovereign transactions account for upstream capital flows and global imbalances. Specifically, we find i) international net private capital flows (inflows minus outflows of private capital) are positively correlated with countries' productivity growth, ii) net sovereign debt flows (government borrowing minus reserves) are negatively correlated with growth only if net public debt is financed by another sovereign, iii) net public debt financed by private creditors is positively correlated with growth, iv) public savings are strongly positively correlated with growth, whereas the correlation between private savings and growth is flat and statistically insignificant. These empirical facts contradict the conventional wisdom and constitute a challenge for the existing theories on upstream capital flows and global imbalances.
Notes: "August 2011. (Revised March 2014.)" -- Publisher's website.

Includes bibliographical references (pages 33-36).