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Capital Flows to Developing Countries: The Allocation Puzzle
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This paper showed that the allocation of capital flows across developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more, and the solution to the allocation puzzle lies at the nexus between growth, saving and international reserve accumulation.Abstract:
The textbook neoclassical growth model predicts that countries with faster productivity growth should invest more and attract more foreign capital. We show that the allocation of capital flows across developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more. We call this puzzle the “allocation puzzle”. Using a wedge analysis, we find that the pattern of capital flows is driven by national saving: the allocation puzzle is a saving puzzle. Further disaggregation of capital flows reveals that the allocation puzzle is also related to the pattern of accumulation of international reserves. The solution to the “allocation puzzle”, thus, lies at the nexus between growth, saving, and international reserve accumulation. We conclude with a discussion of some possible avenues for research.read more
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Asset Bubbles and Global Imbalances
Daisuke Ikeda,Toan Phan +1 more
TL;DR: This paper analyzed the relationship between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies and established a reinforcing relationship between global imbalances and bubbles.
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Dynamic effects of macroeconomic policies on categories of emerging markets’ capital inflows
TL;DR: Using panel and country-specific structural vector autoregressions, the authors analyzes the dynamic and size effects of the US monetary policy shock as well as domestic monetary and exchang...
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Foreign reserve accumulation, foreign direct investment, and economic growth
TL;DR: In this paper , the authors developed a quantitative small-open-economy model to study the determinants of the optimal pace of foreign reserve accumulation by developing countries and found that the elasticity of the foreign borrowing spread with respect to foreign debt and the entry cost for FDI are the key determinants for the optimal reserve accumulation.
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The International Economy: Bind or Boon?:
TL;DR: In this paper, the authors argue that it is increasingly hard to disentangle the overseas from the domestic sectors and design policy to limit any undesirable consequences on regional and income distribution, as well as aggregate fluctuations in activity.
Journal ArticleDOI
Central, Eastern, and Southeastern European Countries’ Convergence: A Look at the Past and Considerations for the Future
TL;DR: In this article, the authors argue that strong demographic headwinds ahead and a subdued outlook for capital accumulation reinforce the need for productivity growth to converge to the income levels of advanced European countries.
References
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Journal ArticleDOI
A Contribution to the Empirics of Economic Growth
TL;DR: The authors examined whether the Solow growth model is consistent with the international variation in the standard of living, and they showed that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data.
Journal ArticleDOI
Finance and Growth: Schumpeter Might Be Right
TL;DR: In this paper, the authors examined a cross-section of about 80 countries for the period 1960-89 and found that various measures of financial development are strongly associated with both current and later rates of economic growth.
Journal ArticleDOI
Why do Some Countries Produce So Much More Output Per Worker than Others
Robert E. Hall,Charles I. Jones +1 more
TL;DR: This article showed that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which are referred to as social infrastructure and called social infrastructure as endogenous, determined historically by location and other factors captured by language.
Journal ArticleDOI
Domestic Saving and International Capital Flows
TL;DR: In this paper, the authors analyzed the international capital market and analyzed a wide range of issues including the nation's optimal rate of saving and the incidence of tax changes and found that saving that originates in a country remains 'to be invested there'.
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