| Abstract | Based on Gourinchas, P. O. and Jeanne, O. (2013), this paper sets up a benchmark model for consumer habits and re-explores capital allocation puzzle in emerging economies and developing countries under the new classical framework. The paper draws some different conclusions: the prediction results of bring into consumer habits model is closer to reality, the real capital allocation puzzle still exists, but the capital allocation puzzle level has been significantly reduced, and the capital allocation puzzle degree of capital flow is more light, these results indicate that the increase in financial and trade opening gradually correct this puzzle in recent years,. The distortion in investment provides a powerful explanation for the capital allocation puzzle, but the distortion of savings is no longer a factor in explaining the puzzle of capital allocation. Therefore, the improvement of investment environment in emerging economies and developing countries is the key factor in eliminating the puzzle of capital allocation. |