INTERNATIONAL CAPITAL MOBILITY - NET VERSUS GROSS STOCKS AND FLOWS

Feldstein and Horioka (1980) observed that net capital flows have been small in relation to domestic saving and investment flows for OECD countries in the post-war period, which they interpreted as evidence of low capital mobility. This paper argues that the correlation between gross domestic and international financial flows can be a better indicator of capital mobilitythan net capital flows. Contrary to the conventional wisdom among international economists, gross flows have been small in relation to gross domestic asset creation for OECD countries, although by this measure the degree of capital mobility increased in the 1980s. © 1990.