The Global Financial Resource Curse

Martin Wolf, Gianluca Benigno and Luca Fornaro

No 1165, Working Papers from Barcelona School of Economics

Abstract: Since the late 1990s, the United States has received large capital flows from developing countries – a phenomenon known as the global saving glut – and experienced a productivity growth slowdown. Motivated by these facts, we provide a model connecting international financial integration and global productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for U.S. non-tradable goods, inducing a reallocation of U.S. economic activity from the tradable sector to the non-tradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth. This effect, which we dub the global financial resource curse, can help explain why the global saving glut has been accompanied by subdued investment and growth, in spite of low global interest rates.

Keywords: Capital flows; international financial integration; global saving glut; global productivity growth; U.S. productivity growth slowdown; low global interest rates; Bretton Woods II; export-led growth (search for similar items in EconPapers)
JEL-codes: E44 F21 F41 F43 F62 O24 O31 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-fdg, nep-int, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://bw.bse.eu/wp-content/uploads/2020/04/1165-file.pdf (application/pdf)

Related works:
Working Paper: The global financial resource curse (2023)
Working Paper: The Global Financial Resource Curse (2020)
Working Paper: The Global Financial Resource Curse (2020)
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:bge:wpaper:1165

Access Statistics for this paper

More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().