Abstract
The allocation puzzle is the positive correlation between growth and capital outflows across developing countries. I decompose capital outflows into its components (private savings, public guaranteed debt, and international reserve flows) and document their contributions beginning from a growth episode. I show that the positive cross-sectional correlation between growth and net out flow of private savings leads the growth start, public savings lags, and international reserve lags. Finally, the positive correlation between growth and aggregated capital outflows - the allocation puzzle - disappear after twenty years. None of the proposed solutions to the allocation puzzle can match these data findings.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
