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


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.


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.


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Copyright information

© International Atlantic Economic Society 2000

Authors and Affiliations

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

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