Trade and Capital Flows: A Financial Frictions Perspective
The classical Heckscher‐Ohlin‐Mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to flow to capital‐scarce countries. In this paper we show that in a world with heterogeneous financial development, a very dif...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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University of Chicago Press
2011
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| Online Access: | http://hdl.handle.net/1721.1/61949 https://orcid.org/0000-0003-2760-451X |
| _version_ | 1811081481460645888 |
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| author | Antras, Pol Caballero, Ricardo J. |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Antras, Pol Caballero, Ricardo J. |
| author_sort | Antras, Pol |
| collection | MIT |
| description | The classical Heckscher‐Ohlin‐Mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to flow to capital‐scarce countries. In this paper we show that in a world with heterogeneous financial development, a very different conclusion emerges. In particular, in less financially developed economies (South), trade and capital mobility are complements in the sense that trade integration increases the return to capital and thus the incentives for capital to flow to South. This interaction implies that deepening trade integration in South raises net capital inflows (or reduces net capital outflows). It also implies that, at the global level, protectionism may backfire if the goal is to rebalance capital flows. |
| first_indexed | 2024-09-23T11:47:03Z |
| format | Article |
| id | mit-1721.1/61949 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:47:03Z |
| publishDate | 2011 |
| publisher | University of Chicago Press |
| record_format | dspace |
| spelling | mit-1721.1/619492022-10-01T06:00:26Z Trade and Capital Flows: A Financial Frictions Perspective Antras, Pol Caballero, Ricardo J. Massachusetts Institute of Technology. Department of Economics Caballero, Ricardo J. Caballero, Ricardo J. The classical Heckscher‐Ohlin‐Mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to flow to capital‐scarce countries. In this paper we show that in a world with heterogeneous financial development, a very different conclusion emerges. In particular, in less financially developed economies (South), trade and capital mobility are complements in the sense that trade integration increases the return to capital and thus the incentives for capital to flow to South. This interaction implies that deepening trade integration in South raises net capital inflows (or reduces net capital outflows). It also implies that, at the global level, protectionism may backfire if the goal is to rebalance capital flows. National Science Foundation (U.S.) 2011-03-24T21:02:26Z 2011-03-24T21:02:26Z 2009-08 Article http://purl.org/eprint/type/JournalArticle 0022-3808 http://hdl.handle.net/1721.1/61949 Antràs, Pol, and Ricardo J. Caballero. “Trade and Capital Flows: A Financial Frictions Perspective.” The Journal of Political Economy 117.4 (2009): 701-744.© 2009 University of Chicago Press. https://orcid.org/0000-0003-2760-451X en_US http://dx.doi.org/10.1086/605583 Journal of Political Economy Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf University of Chicago Press MIT web domain |
| spellingShingle | Antras, Pol Caballero, Ricardo J. Trade and Capital Flows: A Financial Frictions Perspective |
| title | Trade and Capital Flows: A Financial Frictions Perspective |
| title_full | Trade and Capital Flows: A Financial Frictions Perspective |
| title_fullStr | Trade and Capital Flows: A Financial Frictions Perspective |
| title_full_unstemmed | Trade and Capital Flows: A Financial Frictions Perspective |
| title_short | Trade and Capital Flows: A Financial Frictions Perspective |
| title_sort | trade and capital flows a financial frictions perspective |
| url | http://hdl.handle.net/1721.1/61949 https://orcid.org/0000-0003-2760-451X |
| work_keys_str_mv | AT antraspol tradeandcapitalflowsafinancialfrictionsperspective AT caballeroricardoj tradeandcapitalflowsafinancialfrictionsperspective |