This paper considers the financing of investment in the presence of asymmetric information between the 'insiders' and the 'outsiders' of the firms in a small open economy. It establishes a well-defined capital structure for the economy as a whole with the following features: low-productivity...

We provide an exploratory quantitative analysis of the role of capital mobility and international taxation in explaining the observed cross-country diversity in the long-run rates of growth of per capita and total incomes as well as the population growth rates. Corroborative evidence is found...

Using a human capital based growth model, we show the essential role of labor mobility and cross-country tax harmonization in equalizing income levels of countries that start off from different initial income positions. Knowledge spillovers cum labor mobility are the driving forces behind the...

It is well-known that, in the Mundell-Fleming model, capital mobility creates a channel through which permanent (transitory) shocks to aggregate demand such as fiscal and trade shocks are completely (partially) neutralized by the response of the real exchange rate. An important policy...

Foreign direct investment (FDI) is observed to be a predominant form of capital flows to emerging economies, especially when they are liquidity-constrained internationally during a global financial crisis. The financial aspects of FDI are the focus of the paper. We analyze the problem of...

Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The failure to have a tax scheme in which the rate of returns across countries are equated can result in inefficient capital flows across...

We consider the role of capital mobility and international taxation. In explaining the observed diversity in long-term growth rates. Our major finding is that, under capital mobility, international differences in taxes will not matter for total growth differentials. Policy differences have a...

In the presence of asymmetric information, the stage at which financing decisions are made about investment projects in a small open economy is crucial for the composition of international capital inflows as well as for the efficiency of channeling savings into investment. This paper compares...

In Razin, Sadka and Yuen (1998, 1999a), we explored the policy implications of the home-bias in international portfolio investment as a result of asymmetric information problems in which domestic savers, being 'close' to the domestic market, have an informational advantage over foreign portfolio...

The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among...