What drives long-term capital flows? A theoretical and empirical investigation

Verdier, Geneviève

doi:10.1016/j.jinteco.2007.04.005

Cited by 27 publications

(14 citation statements)

References 26 publications

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“…Using the same mechanism as in Barro et al (1995), k/z (in per worker terms) falls during the transition: k is relatively high initially but becomes less important with openness. Verdier (2008) shows that k does not jump immediately to its steady-state since domestic capital accumulation is constrained and k and z are complementary in production. In this setting, domestic savings and foreign investment are complements: "the country's ability to attract capital flows may be directly linked to its savings rate" (Verdier 2008, p. 139).…”

Section: The Theoretical Frameworkmentioning

confidence: 99%

“…A recent contribution by Verdier (2008) introduces domestic (K) and foreign capital (Z), along with labor input, in a CES production function, and derives the equilibrium condition, in which S = I in domestic capital minus net factor payments on debt. Using the same mechanism as in Barro et al (1995), k/z (in per worker terms) falls during the transition: k is relatively high initially but becomes less important with openness.…”

Section: The Theoretical Frameworkmentioning

confidence: 99%

See 1 more Smart Citation

Convergence Rates to Output Growth in a Global World: The Roles of Openness and Government Size

Cabral

Mollick²

2012

The International Trade Journal

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In this article, we examine the effects of three openness measures on 54 industrial and emerging economies' output growth over the "globalization years" of 1986-2004. Controlling for standard determinants of the Solow growth model in panel data, we find positive effects of openness on real output growth. While we find support for higher convergence rates under the open economy, the convergence rates in this article for both samples are remarkably close to the 2% level documented in Mankiw et al. (1992). The inclusion of G/Y, however, reduces the speed of convergence more substantially in industrial economies.

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Section: The Theoretical Frameworkmentioning

confidence: 99%

Section: The Theoretical Frameworkmentioning

confidence: 99%

Convergence Rates to Output Growth in a Global World: The Roles of Openness and Government Size

Cabral

Mollick²

2012

The International Trade Journal

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“…Theoretical and empirical studies offer several explanations to the paradox (see for example Alfaro, Kalemli-Ozcan, & Volosovych, 2008;Gourinchas & Jeanne, 2007;Ju & Wei, 2006), but the dust has yet to settle. See Jones, Ceolho, et al (1986), MilesiFerretti (2002a, 2002b), Reinhart and Rogoff (2004), Alfaro and Hammel (2007), Gourinchas and Jeanne (2007), Verdier (2008), Devereux andSutherland (2009), andWincoop andTille (2010).…”

Section: Introductionmentioning

confidence: 99%

Development threshold, capital flows, and financial turbulence

Ding

Jinjarak

2012

The North American Journal of Economics and Finance

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a b s t r a c tWe study capital flows in a panel of 130 countries, and derive the implications for the observed patterns of capital flows and capital controls before and into the crisis of 2008-11. We find that the size of capital flows is positively correlated with country's income level. In addition, capital flight has a non-linear relationship with the income level. Using the Hansen threshold estimation, we identify a three-stage threshold effect: for low-income countries (GDP per capita below US$ 3,000), capital flight increases as the income level rises; and only after the economy passes a threshold level (GDP per capita above US$ 5,000), capital flight declines with income. We conclude with a case study of Brazil and Korea, observing that the decisions to implement capital control measures tend to be pushed around by the feedbacks among economic growth, currency appreciation, and the global financial conditions.

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“…Research regarding capital flows mentions several factors which are affecting these flows: labor costs, market size, labor availability, preferential policies, intellectual property rights and other factors (see, for example, Helpman, 1984, Markuzen, 1984, Lee and Mansfield, 1996, Gastange et al, 1998, Billington, 1999, Cheng and Kwan, 2000, Bevan and Estrin, 2004, Javorcik, 2004, and Verdier, 2008. The effects of the capital flows over the recipient economies are debatable, with opposing arguments and findings in the literature.…”

Section: Introductionmentioning

confidence: 99%

Are Net FDI Flows and Reversals of Capital Flows a Result of Output Growth?

Aharonovitz

Miller²

2010

The B.E. Journal of Economic Analysis &Amp; Policy

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Literature notes many factors as affecting capital flows, but the effects of these flows over the recipient economies and the overall effect over growth are highly debatable. This study claims that although capital flows may be required for the increase in output, other forces are causing this growth and creating the demand for capital. We construct a model in which growth requires both decisions of firms regarding training of managers in order to expand, representing the absorption capacity of the firms, and capital for the firms' expansion. The model shows that in early stages of development, when output is low, capital inflows are increasing with an increase in the output, but are not the cause for the output growth. However, when output is higher, an increase in the output is associated with financial outflows, since the local savings are increasing by more than the local demand for capital. We use cross-country regressions to show that capital flows are inline with the predictions of the model, and manage to explain half of the variations in net FDI flows per capita using the stage of development. Many policies regarding capital flows may be, therefore, irrelevant.

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What drives long-term capital flows? A theoretical and empirical investigation

Cited by 27 publications

References 26 publications

Convergence Rates to Output Growth in a Global World: The Roles of Openness and Government Size

Convergence Rates to Output Growth in a Global World: The Roles of Openness and Government Size

Development threshold, capital flows, and financial turbulence

Are Net FDI Flows and Reversals of Capital Flows a Result of Output Growth?

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