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Convergence In Neoclassical Models With Capital Mobility And Two Kinds Of Capital

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  • Petr Duczynski

Abstract

The major objective of the paper is to provide a theoretical description of convergence in open economies with various initial ratios of human to physical capital. To avoid immediate convergence, adjustment costs (higher for human capital than for physical capital investment) are introduced. The model is calibrated consistently with empirically-observed slow long-run convergence. Economies with high initial ratios of human to physical capital are, however, predicted to grow quickly in the short run. Moreover, substantial current-account deficits may occur due to high marginal products of physical capital and resulting high levels of domestic physical capital investment. This analysis seems relevant to Central European economies, which exhibit high ratios of human to physical capital, current-account deficits, and relatively high average growth rates.

Suggested Citation

  • Petr Duczynski, 1997. "Convergence In Neoclassical Models With Capital Mobility And Two Kinds Of Capital," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 4(6).
  • Handle: RePEc:czx:journl:v:4:y:1997:i:6:id:42
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    File URL: http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/42
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    References listed on IDEAS

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    1. Dirk Tasche, 2004. "The single risk factor approach to capital charges in case of correlated loss given default rates," Papers cond-mat/0402390, arXiv.org, revised Feb 2004.
    2. Konstantin Belyaev & Aelita Belyaeva & Tomas Konecny & Jakub Seidler & Martin Vojtek, 2012. "Macroeconomic Factors as Drivers of LGD Prediction: Empirical Evidence from the Czech Republic," Working Papers 2012/12, Czech National Bank, Research Department.
    3. Acharya, Viral V. & Bharath, Sreedhar T. & Srinivasan, Anand, 2007. "Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries," Journal of Financial Economics, Elsevier, vol. 85(3), pages 787-821, September.
    4. Jiri Witzany, 2011. "A Two Factor Model for PD and LGD Correlation," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 18(28).
    5. Jon Frye, 2000. "Depressing recoveries," Emerging Issues, Federal Reserve Bank of Chicago, issue Oct.
    6. Stefano Caselli & Stefano Gatti & Francesca Querci, 2008. "The Sensitivity of the Loss Given Default Rate to Systematic Risk: New Empirical Evidence on Bank Loans," Journal of Financial Services Research, Springer;Western Finance Association, vol. 34(1), pages 1-34, August.
    7. Seidler, Jakub & Horvath, Roman & JakubĂ­k, Petr, 2009. "Estimating expected loss given default in an emerging market: the case of Czech Republic," Journal of Financial Transformation, Capco Institute, vol. 27, pages 103-107.
    8. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, vol. 4(3), pages 205-231, September.
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    Cited by:

    1. Petr Duczynski, 2001. "Adjustment Costs in a Two-Capital Growth Model," Macroeconomics 0012018, EconWPA.

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