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International Trade and Economic Convergence: The Credit Channel

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  • Lane, Philip R

Abstract

In this paper, we examine a particular mechanism by which international trade accelerates economic convergence. We develop a model of growth under credit constraints in which international trade expands access to credit. We show in numerical simulations that reasonable values for openness generate convergence rates that match well the empirical estimates. We econometrically investigate a key prediction of the model--that more open economies exhibit greater debt to output ratios--and find substantial support in the data for this claim. This remains true even when we control for a host of additional factors and conduct robustness checks. Copyright 2001 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 53 (2001)
Issue (Month): 2 (April)
Pages: 221-40

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Handle: RePEc:oup:oxecpp:v:53:y:2001:i:2:p:221-40

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Cited by:
  1. Dimitris K. Christopoulos & Karine Gente & Miguel A. Leon-Ledesma, 2008. "Net Foreign Assets, Productivity and Real Exchange Rates in Constrained Economies," Discussion Papers 2008-17, School of Economics, The University of New South Wales.
  2. Philip L. Brock, 2009. "Collateral Constraints and Macroeconomic Adjustment in an Open Economy," Working Papers UWEC-2009-03, University of Washington, Department of Economics.
  3. Lipschitz, Leslie & Rochon, Céline & Verdier, Geneviève, 2011. "A real model of transitional growth and competitiveness in China," Journal of Asian Economics, Elsevier, vol. 22(4), pages 267-283, August.
  4. Genevieve Verdier, 2005. "The (Much Understated) Quantitative Role of Capital Accumulation and Saving," Macroeconomics 0507015, EconWPA.
  5. Lin, Faqin & Sim, Nicholas C.S., 2013. "Trade, income and the Baltic Dry Index," European Economic Review, Elsevier, vol. 59(C), pages 1-18.
  6. Leslie Lipschitz & Geneviève Verdier & Céline Rochon, 2008. "A Real Model of Transitional Growth and Competitiveness in China," IMF Working Papers 08/99, International Monetary Fund.
  7. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series iiisdp265, IIIS.
  8. Genevieve Verdier, 2003. "What Drives Long-term Capital Flows? A Theoretical and Empirical Investigation," Macroeconomics 0310011, EconWPA, revised 14 Jul 2005.
  9. Omar Neme Castillo & Ana Lilia Valderrama Santibáñez & Humberto Ríos Bolívar, 2013. "Comercio internacional, IED, capital humano e ingreso per cápita en América Latina y el Caribe," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 101-139, May.
  10. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2000. "External Capital Structure: Theory and Evidence," CEPR Discussion Papers 2583, C.E.P.R. Discussion Papers.

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