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Capital deepening
About: Capital deepening is a research topic. Over the lifetime, 5203 publications have been published within this topic receiving 230297 citations.
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TL;DR: In this paper, the authors examined the impact of interest rate reforms on financial deepening and economic growth in Kenya, using two models: the financial deepening model and the dynamic Granger causality model, and concluded that the interest rate liberalization in Kenya has succeeded in increasing economic growth through its influence on financial depth.
Abstract: This paper examines the impact of interest rate reforms on financial deepening and economic growth in Kenya, using two models: the financial deepening model and the dynamic Granger causality model. The study attempts to answer two critical questions: Does interest rate liberalization in Kenya have any positive influence on financial deepening? Does the financial depth which results from interest rate liberalization lead to economic growth? Using cointegration and error-correction models, the study finds strong support for the positive impact of interest rate liberalization on financial deepening in Kenya - although the strength and clarity of its efficacy is sensitive to the level of the dependency ratio. The study also finds financial depth to Granger cause economic growth in Kenya. The study, therefore, concludes that the interest rate liberalization in Kenya has succeeded in increasing economic growth through its influence on financial depth. This applies irrespective of whether the models are estimated in a static long-run formulation (cointegration model) or in the dynamic formulation (error-correction model).
63 citations
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TL;DR: This article found evidence to suggest that capital inflows have increased in response to a rise in the rate of return on capital, which reflected the structural increase in US productivity seen in recent years.
Abstract: This article focuses on the possible role of capital flows in explaining exchange rate movements. Some commentators have suggested that a substantial increase in capital flows into the United States could have accounted for the recent appreciation of the US dollar. This could imply that capital inflows have increased in response to a rise in the rate of return on capital, which in turn has reflected the structural increase in US productivity seen in recent years. We find evidence to suggest that this may explain part of the recent dollar appreciation, but unsurprisingly it does not provide a full explanation.
62 citations
TL;DR: In this article, a measure of long-run capital mobility is proposed, which can be easily calculated as a byproduct of the estimation procedure of a cointegrated VAR.
62 citations
TL;DR: The model is viewed as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.
62 citations
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TL;DR: In this paper, the authors show that under the assumption of a fixed capital supply (zero capital supply elasticity) the decentralized policy choice is optimal for a decentralized economy with mobile capital and spillovers among jurisdictions.
Abstract: This paper points to the important role which the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of policymaking in a decentralized economy with mobile capital and spillovers among jurisdictions. In accordance with previous studies, we show that under the assumption of a fixed capital supply (zero capital supply elasticity) the decentralized policy choice is optimal. If the capital supply elasticity is strictly positive, however, capital tax rates are inefficiently low in the decentralized equilibrium.
62 citations