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International Capital Flows in Club of Convergence

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  • Ly Dai Hung

    (Vietnam Institute of Economics, Hanoi, Vietnam)

  • Nguyen Thi Thuy Hoan

Abstract

We explain U-shape pattern of international capital inflows by one multi-country OLG economy and one cross-section data sample. The theory proves that capital inflows are decreasing on distance to frontier, which is measured by ratio of domestic productivity level over United States' level. The evidences not only confirm the theory but also reveal that growth is decreasing on distance to frontier for club of convergence but increasing for club of unconvergence. Therefore, Neo-Classical growth model's implication, that capital inflows are positively correlated to growth, applies for club of convergence. However, Allocation puzzle, that capital inflows are negatively correlated to growth, works for club of unconvergence. The turning point of U-shape pattern is the productivity growth rate at world technology frontier.

Suggested Citation

  • Ly Dai Hung & Nguyen Thi Thuy Hoan, 2018. "International Capital Flows in Club of Convergence," Working Papers hal-01935173, HAL.
    • Handle: RePEc:hal:wpaper:hal-01935173
    Note: View the original document on HAL open archive server: https://hal.science/hal-01935173v2
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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

    International Capital Flows; Productivity Growth; Relative Convergence;
    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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