We identify the determinants of capital movements in an ‘augmented-Solow’ model where capital mobility is restricted to a subset of capital assets. We then test the prediction of the neoclassical model and find that it is consistent with the evidence on net capital flows in a cross-section...

It has been argued in the literature that interjurisdictional competition forces the public sector to increase its efficiency and thus helps to tame Leviathan governments. The paper addresses this hypothesis by means of a simple tax-competition model with a Leviathan state. It is seen that the...

This Paper explores the relationship between environmental protection and international capital movements, when tax policy is endogenous (through voting). A two-period general equilibrium model of a small open economy is specified to compare the effects of two different constitutions (commitment...

This paper examines the co-movement among stock market prices and exchange rates within a three-country Centre-Periphery dynamic equilibrium model in which agents in the Centre country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through...

Using panel data of 19 developed economies in the period 1985-2000, we show that share issue privatization (SIP) strongly affects a fundamental aspect of financial development: market liquidity. First, we identify the channels through which a sustained SIP program boosts the liquidity of the...

We provide an overview of the recent developments of the literature on the determinants of long term capital flows, global imbalances and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown in...

Recent episodes (October 2008, May 2010, August 2011) have witnessed huge spikes in equity price risk (implied volatility). Apart from their large size, several features characterize these risk panics. They are global phenomena, shared among a broad set of countries. There is substantial...

Using event studies we find statistically and economically significant, negative daily abnormal stock market returns prior to sovereign debt rating downgrade announcements. Instrumental variable techniques show that these findings are more pronounced in countries with lower institutional...

Despite current economic problems and conflicts - or perhaps as their cause - the concordance of policies among the major industrial countries in the first half of the 1980s in dealing with finance, trade and development is at a peak. This has been the result not so much of cooperation or...

This paper uses a large panel of financial flow data from banks to assess how institutions affect international lending. First, employing a time varying composite institutional quality index in a fixed-effects framework, the paper shows that institutional improvements are followed by significant...