Financial Integration, Entrepreneurial Risk and Global Imbalances

摘要: How does financial integration impact capital accumulation, current-account dynamics, and cross-country inequality? We investigate this question within a two-country, general-equilibrium, incomplete-markets model that focuses on the importance of idiosyncratic entrepreneurial risk - introduces, not only precautionary motive for saving, but also wedge between interest rate marginal product capital. Our contribution is to show friction provides simple explanation emergence global imbalances, resolution empirical puzzle often fails flow from rich or slow-growing countries poor fast-growing ones, set policy lessons regarding intertemporal costs benefits capital-account liberalization.