To what extent is capital really internationally mobile? : assessments from a Norwegian perspective

Abstract

While evidence of smooth international interest rate arbitrage suggests that financial centers in various industrial countries are well integrated, it is still not clear whether investment and consumption patterns as well as portfolio compositions reflect a high degree of “real” capital mobility. This paper attempts to assess the degree of real capital mobility between Norway and the rest of the world by means of i) saving-investment balances, ii) the portfolio composition of private Norwegian investors and iii) consumption correlations between Norway and the other Nordic countries. We argue that the degree of capital mobility has gradually increased to fairly high levels. This implies that Norwegian economic policy (tax policy, wealth management) should not be reformulated based on the idea, which recently has received a lot of attention in the Norwegian wealth management debate, that “capital is not that mobile after all”.