Advertisement

International Advances in Economic Research

, Volume 6, Issue 3, pp 451–460 | Cite as

International capital flows and convergence in the neoclassical growth model

  • Lorenzo Escot
  • Miguel-Angel Galindo
Articles

Abstract

To analyze how capital mobility affects economic growth and convergence, this paper will use the analytical solution to the neoclassical growth model with a constant saving rate, beginning with the closed-economy Solow growth model. An introduction to international capital flows will follow. In an open economy, free capital mobility assures an instantaneous convergence in interest rates that, under a perfect competence situation, implies the instantaneous convergence in income levels among homogeneous countries. Taking into account this question and to reconcile these results with empirical evidence, that is, with the gradual convergence observed, the assumption is introduced that in spite of free capital mobility, there are international credit restrictions. In this case, we will show how the rate of convergence depends on the international capital inflows received.

Keywords

Economic Growth Interest Rate Open Economy Saving Rate International Capital 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Aghion, P.; Howitt, P.Endogenous Growth Theory, Cambridge, MA: MIT Press, 1998.Google Scholar
  2. Barro, R. J.; Mankiw, N. G.; Sala-i-Martin, X. "Capital Mobility in Neoclassical Models of Growth,"American Economic Review, 85, 1995, pp. 103–15.Google Scholar
  3. Barro, R. J.; Sala-i-Martin, X. "Convergence,"Journal of Political Economy, 100, 2, 1992, pp. 223–51.CrossRefGoogle Scholar
  4. __Economic Growth, New York, NY: McGraw-Hill, 1995.Google Scholar
  5. Carlberg, M.International Economic Growth, Heidelberg, Germany: Physica Verlag, 1997.Google Scholar
  6. Cohen, D.; Sachs, J. D. "Growth and External Debt Under Risk of Debt Reputation,"European Economic Review, 30, 3, June 1986, pp. 1138–54.CrossRefGoogle Scholar
  7. Galindo, M. A.; Escot, L. "The Technological Catch-Up Effects on the Convergence Hypothesis of Growth Models,"Research Studies Series, 116, University of York, 1998.Google Scholar
  8. Gandolfo, G.Economic Dynamics, Berlin, Germany: Springer, 1997.Google Scholar
  9. Grossman, G. M.; Helpman, E.Innovation and Growth in the Global Economy, Cambridge, MA: MIT Press, 1991.Google Scholar
  10. Jensen, B. S.; Wong, K. Y., eds.Dynamics, Economic Growth, and International Trade, Ann Arbor, MI: University of Michigan Press, 1997.Google Scholar
  11. Long, N. V.; Wong, K. Y. "Endogenous Growth and International Trade: A Survey," in B. S. Jensen; K. Y. Wong, eds.,Dynamics, Economic Growth, and International Trade, Ann Arbor, MI: University of Michigan Press, 1997.Google Scholar
  12. Mankiw, G.; Romer, D.; Weil, D. "A Contribution to the Empirics of Economic Growth,"Quarterly Journal of Economics, 107, May, 1992, pp. 407–37.Google Scholar
  13. Obstfeld, M.; Rogoff, K.Foundations of International Macroeconomics, Cambridge, MA: MIT Press, 1996.Google Scholar
  14. Sachs, J. D.; Warner, A. "Economic Reform and the Process of Global Integration,"Brookings Papers on Economic Activity, 1, 1995, pp. 2–118.Google Scholar
  15. Solow, R. M. "A Contribution to the Theory of Economic Growth,"Quarterly Journal of Economics, 70, 1956, pp. 65–94.Google Scholar
  16. Summers, R.; Heston, A. "The Penn World Table (Mark 5): An Expanded Set of International Comparisions, 1950–1988,"Quarterly Journal of Economics, 106, 2, May 1991, pp. 327–68.Google Scholar
  17. Swan, T. R. "Economic Growth and Capital Accumulation,"Economic Record, 32, 1956, pp. 334–61.Google Scholar

Copyright information

© International Atlantic Economic Society 2000

Authors and Affiliations

  • Lorenzo Escot
    • 1
  • Miguel-Angel Galindo
    • 1
  1. 1.University Complutense of MadridSpain

Personalised recommendations