Journal ArticleDOI
Capital Flows to Developing Countries: The Allocation Puzzle
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TLDR
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
Citations
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Journal ArticleDOI
Growing Like China
TL;DR: In this article, a growth model that is consistent with salient features of the recent Chinese growth experience is presented, including high output growth, sustained returns on capital investment, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus.
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Aid and Growth: What Does the Cross-Country Evidence Really Show?
TL;DR: This article examined the effects of aid on growth in cross-sectional and panel data, after correcting for the possible bias that poorer (or stronger) growth may draw aid contributions to recipient co
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Financial Integration, Financial Development, and Global Imbalances
TL;DR: In this article, the authors analyze the relationship between financial integration and the composition of foreign portfolios and find that countries with negative net foreign asset positions maintain positive net holdings of nondiversifiable equity and foreign direct investment.
Journal ArticleDOI
An Equilibrium Model of "Global Imbalances" and Low Interest Rates
TL;DR: The authors rationalizes these facts as an equilibrium outcome when different regions of the world differ in their capacity to generate financial assets from real investments, and extends the basic model generate exchange rate and foreign direct investment excess returns broadly consistent with the recent trends in these variables.
Journal ArticleDOI
Relative Prices and Relative Prosperity
Chang-Tai Hsieh,Peter J. Klenow +1 more
TL;DR: The positive correlation between real investment rates and real income levels across countries is driven largely by differences in the price of investment relative to output as discussed by the authors, which is not driven by high tax or tariff rates on investment.
References
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Book ChapterDOI
Chapter 9 Accounting for Cross-Country Income Differences
TL;DR: The current consensus is that efficiency is at least as important as capital in explaining income differences as mentioned in this paper, and the basic methods that lead to this consensus are surveyed and explored in this paper.
Journal ArticleDOI
Why are Saving Rates of Urban Households in China Rising
Marcos Chamon,Eswar Prasad +1 more
TL;DR: Wang et al. as discussed by the authors use household-level data to explain why households are postponing consumption despite rapid income growth in China, and they find that financial underdevelopment, as reflected in constraints on borrowing and low returns on financial assets, partially accounts for this pattern.
ReportDOI
Why is Capital so Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation
Roger H. Gordon,Lans Bovenberg +1 more
TL;DR: In this paper, the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy.
Journal ArticleDOI
Saving and Growth: A Reinterpretation
TL;DR: This article examined the relationship between income growth and saving using both cross-country and household data, and found that households with higher income growth save more than households with low growth, and argued that standard permanent income models of consumption cannot explain these findings but a model of consumption with habit formation may.
ReportDOI
Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously
TL;DR: This article showed that long-run economic growth is significantly correlated with behavioral variables such as the savings rate, and that this correlation is not easily explained by models in which growth is treated as the exogenous variable.