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International Capital Flows in Club of Convergence

Ly-Dai, Hung

MPRA Paper from University Library of Munich, Germany

Abstract: We explain U-shape pattern of international capital inflows by one multi-country OLG economy and one cross-section data sample. The theory proves that capital inflows are decreasing on distance to frontier, which is measured by ratio of domestic productivity level over United States’ level. The evidences not only confirm the theory but also reveal that growth is decreasing on distance to frontier for club of convergence but increasing for club of unconvergence. Therefore, Neo-Classical growth model’s implication, that capital inflows are positively correlated to growth, applies for club of convergence. However, Allocation puzzle, that capital inflows are negatively correlated to growth, works for club of unconvergence. The turning point of U-shape pattern is the productivity growth rate at world technology frontier.

Keywords: International Capital Flows; Productivity Growth; Relative Convergence (search for similar items in EconPapers)
JEL-codes: F15 F36 F43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro and nep-opm
Date: 2018-07
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