International Finance and Income Convergence: Europe is Different

Daniel Leigh, Abdul Abiad and Ashoka Mody

No 2007/064, IMF Working Papers from International Monetary Fund

Abstract: Recent studies conclude that the ongoing global financial integration may have had little or no value in advancing economic growth, especially in poor countries. Capital is often found to flow "uphill" from poor to rich countries. And, when it does flow into the less developed economies, it is negatively correlated with growth, calling into question the desirability of foreign capital. In this paper we report that Europe-including the new member states of the European Union-provides a counterexample to these global anomalies. With increasing financial integration, capital in Europe has traveled "downhill" from rich to poor countries, and has done so with gathering strength. These inflows have been associated with significant acceleration of income convergence.

Keywords: WP; balance-to-GDP ratio; benchmark current account regression; current account equation; current account isoquant (search for similar items in EconPapers)
Pages: 36
Date: 2007-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=20522 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2007/064

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().