New research reveals how global capital flows impact financial stability
Understanding how money moves between countries is important for economic stability. A new model was created to track money flow between banks and households in different countries. The model shows that when there are economic shocks, money moving in and out of a country can change in different ways. This has implications for financial vulnerability, global saving patterns, and the creation of new money. The high correlation between money coming in and going out of a country is mainly due to accounting practices, not separate economic decisions.