Lucas paradox using the example of the United States and China

The thesis titled Lucas paradox using the example of the United States and China is engaged in mutual trade and investment relations between these economies, whose intensity increases with time. The USA realized high trade deficit with China due to its over-consumption. The USA can afford the deficit thanks to the considerable inflow of Chinese capital. China buys American assets, as it needs to evaluate its foreign exchange reserves, which are now reaching record numbers. Therefore there is a significant inflow of capital from developing to developed economies, although the theory understands poor countries mainly as a recipient of capital flows. This phenomenon is known as the Lucas paradox, named after American economist Robert E. Lucas. The aim of the thesis is to explain the Lucas paradox on the example of the United States and China and bring the key factors that lead to its existence. Based on the theoretical foundations and macroeconomic data comparison of the two economies, the work focuses on international capital flows and the contemporary imbalance in the balance of payments of the USA and China.