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Financial integration, foreign savings and income convergence: theory and evidence

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  • Aderbal Oliveira Damasceno

Abstract

The conventional argument favoring capital controls elimination is based on the predictions from the neoclassical model: free international capital mobility would allow capital flows from country where capital is abundant to countries where capital is scarce and the outcome in a global perspective is efficient allocation of savings and income convergence. Within this perspective, financial integration would be particularly beneficial for developing countries resulting in external savings import, temporary increase in per capita GDP growth rate and a permanent increase in the per capita GDP level. Using data for a sample of 105 countries from 1980 to 2004 the evidences show that capitals flows from developing to developed countries and that international financial integration and external savings do not increase the conditional convergence rate. JEL Classification: F33; F36; F43.

Suggested Citation

  • Aderbal Oliveira Damasceno, 2011. "Financial integration, foreign savings and income convergence: theory and evidence," Brazilian Journal of Political Economy, Center of Political Economy, vol. 31(5), pages 751-770.
    • Handle: RePEc:ekm:repojs:v:31:y:2011:i:5:p:751-770:id:383
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    More about this item

    Keywords

    international financial integration; international capital flows; conditional convergence.;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • 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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