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International capital flows in club of convergence

Author

Listed:
  • Ly Dai Hung
  • Hoan Nguyen Thi Thuy

Abstract

Purpose - The paper analyzes the pattern of international capital flows, accounting for the convergence on economic growth. Design/methodology/approach - The paper employs an empirical analysis combined with a theoretical model. The evidence is based on a cross-section regression over a sample of 172 economies. And the model is an open multi-country overlapping generation (OLG) economy. Findings - The empirical evidence records that the pattern of international capital flows in the club of convergence can diverge from the pattern in the club of unconvergence. A higher productivity growth rate is associated with more net capital inflows in the club of convergence but less net capital inflows in the club of unconvergence. The theory shows that proximity to world technology frontier can explain the divergence of capital flows. Research limitations/implications - The result can account for controversies between theories on the cross-border capital flows: allocation puzzle, up-hill capital flows and neoclassical growth model. Originality/value - The paper combines both the empirical analysis with the theoretical model construction to account for the role of convergence of economic growth on determining the pattern of international capital flows.

Suggested Citation

  • Ly Dai Hung & Hoan Nguyen Thi Thuy, 2020. "International capital flows in club of convergence," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(8), pages 1401-1420, November.
    • Handle: RePEc:eme:jespps:jes-02-2020-0074
    DOI: 10.1108/JES-02-2020-0074
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    Cited by:

    1. Ly Dai Hung & Nguyen Thi Thuy Hoan, 2022. "International Capital Flows When Safe Assets Scarcity Matters," South Asian Journal of Macroeconomics and Public Finance, , vol. 11(2), pages 151-167, December.
    2. Ly Dai Hung, 2020. "A Macro-Finance Model of Government Bonds Yields in Vietnam," Working Papers hal-03133807, HAL.

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    More about this item

    Keywords

    Capital flows; Productivity growth; Relative convergence; F15; F36; F43;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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