BKK the EZ Way: International Long-Run Growth News and Capital Flows

• 成果类型: Article
• 署名作者: Colacito, Ric; Croce, Max; Ho, Steven; Howard, Philip
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; National Bureau of Economic Research; University of North Carolina; University of North Carolina Chapel Hill; Bocconi University; Center for Economic & Policy Research (CEPR); Columbia University; Tsinghua University; Wake Forest University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20141123
• 发表日期: 2018
• 页码: 3416-3449
• 关键词: real exchange-rate; business cycles; asset returns; Risk premium; DYNAMICS; TRADE; MARKETS; preferences; consumption; INVESTMENT

摘要

We study the response of international investment flows to short- and long-run growth news. Among developed G7 countries, positive long-run news for domestic productivity induces a net outflow of investments, in contrast to the effects of short-run growth shocks. We document that a standard Backus, Keho, and Kydland (1994) (BKK) model fails to reproduce this novel empirical evidence. We augment this model with Epstein and Zin (1989) preferences (EZ-BKK) and characterize the resulting recursive risk-sharing scheme. The response of international capital flows in the EZ-BKK model is consistent with the data.