Distinguishing Across Models of International Capital Flows

We use maximum likelihood techniques to distinguish across models of international capital flows using a comprehensive dataset on GDP, capital stocks, consumption, investment, employment, and net exports (used to measure capital flows) for 200 countries between 1950 and 2005. Specifically, we apply a structural estimation and testing methodology to a range of models proposed in the literature: defaultable debt, expropriable investment, limited commitment, as well as the complete markets benchmark.