Financial integration, entrepreneurial risk and global imbalances
By: George-Marios Angeletos, Vasia Panousi
Contributors: Panousi, Vasia; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16761; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16761.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "How does financial integration impact capital accumulation, current-account dynamics, and cross-country inequality? We investigate this question within a two-country, general-equilibrium, incomplete-markets model that focuses on the importance of idiosyncratic entrepreneurial risk- a risk that introduces, not only a precautionary motive for saving, but also a wedge between the interest rate and the marginal product of capital.  Our contribution is to show that this friction provides a simple explanation for the emergence of global imbalances, a resolution to the empirical puzzle that capital often fails to flow from the rich or slow-growing countries to the poor or fast-growing ones, and a set of policy lessons regarding the intertemporal costs and benefits of capital-account liberalization"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/10/2011.

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