A Model of Fickle Capital Flows and Retrenchment

• 成果类型: Article
• 署名作者: Caballero, Ricardo J.; Simsek, Alp
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Center for Economic & Policy Research (CEPR)
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/705719
• 发表日期: 2020
• 页码: 2288-2328
• 关键词: WELFARE GAINS; HOME BIAS; RISK; liquidity; MARKETS; WEALTH; flight; LIMITS

摘要

We develop a model of gross capital flows and analyze their role in global financial stability. In our model, consistent with the data, when a country experiences asset fire sales, foreign investments exit (fickleness), while domestic investments abroad return home (retrenchment). When countries have symmetric expected returns and financial development, the benefits of retrenchment dominate the costs of fickleness and gross flows increase fire-sale prices. Fickleness, however, creates a coordination problem since it encourages local policy makers to restrict capital inflows. When countries are asymmetric, capital flows are driven by additional mechanisms-reach for safety and reach for yield-that can destabilize the receiving country.