Has international borrowing or lending driven Australia's net capital inflow?

Makin, Anthony J and Narayan, Paresh Kumar 2013, Has international borrowing or lending driven Australia's net capital inflow?, International review of economics and finance, vol. 27, pp. 134-143.

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Title Has international borrowing or lending driven Australia's net capital inflow?
Author(s) Makin, Anthony J
Narayan, Paresh Kumar
Journal name International review of economics and finance
Volume number 27
Start page 134
End page 143
Total pages 10
Publisher Elsevier BV
Place of publication Amsterdam, The Netherlands
Publication date 2013-06
ISSN 1059-0560
1873-8036
Keyword(s) saving
investment
international borrowing and lending
Australia
interest rates
Summary Over the recent decades the most significant global imbalances have been between Asia-Pacific economies, with most attention directed to the imbalances of the largest economies, China, Japan and the United States. In contrast, this paper examines how external account imbalances and real long term interest rates are determined in smaller open economies. It first derives the proposition that external imbalances and long term interest rates move together whenever saving-investment shocks are predominantly domestically sourced, but move oppositely when saving-investment shocks mainly emanate abroad. It then shows that in the case of Australia, an Asia-Pacific economy that has borrowed heavily from abroad since the mid 1980's, rising net capital inflow has had a statistically significant negative impact on domestic real interest rates. This suggests that over that time net international lending rather than net foreign borrowing was mainly responsible for the variation in its external imbalance and real interest rates.
Language eng
Field of Research 150202 Financial Econometrics
Socio Economic Objective 910206 Market-Based Mechanisms
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2013
Copyright notice ©2013, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30056350

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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