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The Lucas Paradox in the Great Recession: Does the type of capital matter?

Author

Listed:
  • Alba Del Villar Olano

    (Universidad Pública de Navarra)

Abstract
This paper is the first to examine the Lucas Paradox during the Great Recession. Results show that in the 2008-2015 period, the Paradox might be even more pronounced than in the previous decades. Moreover, our findings suggest that disaggregating capital flows by type of capital is important since trade flows are found to be a key determinant of Foreign Direct Investment (FDI) and credit to private sector mostly explains Portfolio Equity flows. The quality of institutions, although statistically significant, does not provide the solution for the Lucas puzzle.

Suggested Citation

  • Alba Del Villar Olano, 2018. "The Lucas Paradox in the Great Recession: Does the type of capital matter?," Economics Bulletin, AccessEcon, vol. 38(2), pages 1052-1057.
    • Handle: RePEc:ebl:ecbull:eb-18-00037
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I2-P101.pdf
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    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Lucas Paradox; Great Recession; International Capital flows; Institutions;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F2 - International Economics - - International Factor Movements and International Business

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