The virtuous imperative: Modeling capital flows in the presence of non-linearity

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Abstract

This paper models capital flows in terms of an infinite horizon continuous time portfolio theoretic framework. Both the inter-temporal equilibrium mix of domestic and foreign assets and an equilibrium mix of flows of funds to domestic and foreign assets are derived. These results allow us to demonstrate that Tobin taxes, at best, have a transitory (though often ambiguous) effect, and prove to be both unsustainable and of undesirable long run impact.

Original languageEnglish (US)
Pages (from-to)445-461
Number of pages17
JournalEconomic Modelling
Volume19
Issue number3
DOIs
StatePublished - Mar 14 2002

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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