Do Debt Flows Crowd Out Equity Flows Or the Other Way Round?

Assaf Razin, Efraim Sadka and Chi-Wa Yuen

No 7736, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In the presence of asymmetric information, the stage at which financing decisions are made about investment projects in a small open economy is crucial for the composition of international capital inflows as well as for the efficiency of channeling savings into investment. This paper compares the implications of two extreme cases regarding the information possessed by the firms at their financing stage for whether inflows of foreign debt may crowd out foreign equity or the other way round. The scope for corrective tax policies is examined. We also provide a welfare comparison between the two mechanisms of capital flows.

JEL-codes: D82 F21 (search for similar items in EconPapers)
Date: 2000-06
New Economics Papers: this item is included in nep-fin and nep-ifn
Note: IFM PE
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Citations: View citations in EconPapers (4)

Published as Assaf Razin & Efraim Sadka & Chi-Wa Yuen, 2000. "Do Debt Flows Crowd Out Equity Flows or the Other Way Round?," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 33-47, May.

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Related works:
Journal Article: Do Debt Flows Crowd Out Equity Flows or the Other Way Round? (2000)
Working Paper: Do Debt Flows Crowd Out Equity Flows or the Other Way Round? (2000)
Working Paper: Do Debit Flows Crowd out Equity Flows or the other way Round? (1998)
Working Paper: Do Debt Flows Crowd out Equity Flows or the Other Way Round? (1998)
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