Financial Development, Technological Change in Emerging Countries and Global Imbalances
AbstractThe paper shows that in a general equilibrium model with two countries, characterized by different levels of financial development, and two technologies, one more productive and more financially demanding than the other, the following stylized facts can be replicated: 1) the persistent US current account deficits since the beginning of the 90's; 2) growth of output per worker in developing countries in relative terms with the US during the same period; 3) relative capital accumulation and 4) TFP growth in these countries, also relative to the US. The more productive technology takes more time to implement and is subject to liquidity shocks, while the less productive one, along with external bond assets, can be used as a hoard to finance those liquidity shocks. As a result, after financial globalization, if the emerging economy is capital scarce and if its financial market is sufficiently incomplete, it experiences an increase in net foreign assets that coincides with a fall in the less productive investment and a rise in the more productive one. Convergence towards the steady state implies then both a better allocation of capital that generates endogenous aggregate TFP gains and a rise in aggregate investment that translates into higher growth.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 10.10.
Length: 50 pages
Date of creation: Oct 2010
Date of revision:
Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC
growth; capital flows; credit constraints; financial globalization; technological change;
Other versions of this item:
- Kenza Benhima, 2008. "Financial Development, Technological Change in Emerging Countries and Global Imbalances," EconomiX Working Papers 2008-26, University of Paris West - Nanterre la Défense, EconomiX.
- 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
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-DGE-2010-10-23 (Dynamic General Equilibrium)
- NEP-FDG-2010-10-23 (Financial Development & Growth)
- NEP-OPM-2010-10-23 (Open Economy Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philippe Aghion & Philippe Askenazy & Nicolas Berman & Gilbert Cette & Laurent Eymard, 2012.
"Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France,"
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NBER Working Papers
19688, National Bureau of Economic Research, Inc.
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- Horioka, Charles Yuji & Terada-Hagiwara, Akiko, 2013. "Corporate Cash Holding in Asia," ADB Economics Working Paper Series 381, Asian Development Bank.
- Charles Yuji Horioka & Akiko Terada-Hagiwara, 2013. "Corporate Cash Holding in Asia," ISER Discussion Paper 0889, Institute of Social and Economic Research, Osaka University.
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