The Relationship between Macroeconomic Rates of Return of Investment and the Speed of Convergence: A Panel Data Analysis

José Alves and Matilde Santos

No 2025/0397, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We analyse the impact of macroeconomic rates of return of investment on time-varying beta convergence coefficients. This paper aims to establish and empirically demonstrate a relationship between macroeconomic rates of return of investment and the speed of convergence of economies to their own steady state. First, we use the four different kinds of macroeconomic rates found in Afonso et al (2025), then we compute the time-varying beta convergence coefficients for two different time lags, one of ten years and another of five, all according to the approach of Schlicht (2021). Finally, we regress the betas on the macroeconomic rates of return, controlling for some variables. Our panel data set contains 16 OECD countries and spans the years starting in 1980 and ending in 2022. We conclude that the impact of the macroeconomic rates of return on the speed of convergence is mostly positive but differs in magnitude depending on which kind of macroeconomic rate of return and on which set of control variables accompanies the regression.

Keywords: Macroeconomic Rates of Return; Conditional Convergence; Speed of Convergence; Time-Varying Coefficients. (search for similar items in EconPapers)
JEL-codes: E13 E22 H54 O47 (search for similar items in EconPapers)
Date: 2025-10
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