Foreign portfolio investment is threatened by the risk of default and repudiation, while direct foreign investment is threatened by the risk of expropriation. These two contractual forms of investment can differ substantially in: (1) the amount of capital they can transfer from abroad to...

This paper attempts to survey, and to put into perspective, recent lterature that has analyzed the nature of credit relations between developed and developing countries.This analysis has made use of recent advances in the economics of information and strategic interaction. Traditional concepts...

This paper develops a theory of capital movements in the presence of potential expropriation. The threat of expropriation is derived from utility maximizing behavior by host countries. Potential investors, anticipating this behavior, modify their investment plans to avoid expropriation. When-...

This paper examines the relationship between unfunded vested pension liabilities and the market value of a firm's shares. This relationship has important implications for the mechanism by which private pensions influence aggregate savings. Attention is paid to modeling the institutional...

The banking systems of some countries export intermediation services to the rest of the world, while many other countries are net exporters of deposits to banks abroad and net importers of loans from banks abroad. Banking center countries typically have lower inflation, deeper financial systems,...

I develop a model in which sovereign debtors repay debt in order to maintain a reputation for repayment. Repayment gives creditors reason to think that the debtor will suffer adverse consequences if it defaults, so they continue to lend. I compare a situation in which competitive lenders earn a...

When rents generated by government policies are perceived as permanent, the rights to earn them may be capitalized as assets that form a component of nonhuman wealth. The existence of such assets raises international indebtedness, while shifts in policy that increase or reduce the importance of...

Significant amounts of private capital have flowed out of several of the more heavily indebted developing countries. This outflow, often called "capital flight ," largely escapes taxation by the borrowing-country government, and has generated concern about the prospects for future servicing of...

If contracts are costlessly enforcible then insolvency is the only reason for nonrepayment of loans. While some models have examined the borrower's incentive to repay, it has typically been assumed that the penalty suffered by a debtor in default is imposed automatically and without cost to the...

Land and capital serve not only as factors of production but as assets which households use as stores of value. Standard trade models typically recognize only the first role. In its role as an asset land reduces the amount of national savings available for capital investment. Foreign investment...