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International Capital Flows in Club of Convergence

Author

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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.archives-ouvertes.fr/hal-01935173v2
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    References listed on IDEAS

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    1. Ly-Dai, Hung, 2016. "Non-Linear Pattern of International Capital Flows," MPRA Paper 90236, University Library of Munich, Germany, revised 08 Oct 2018.
    2. Nicolas Coeurdacier & Stéphane Guibaud & Keyu Jin, 2015. "Credit Constraints and Growth in a Global Economy," American Economic Review, American Economic Association, vol. 105(9), pages 2838-2881, September.
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    6. Kiminori Matsuyama, 2014. "Institution-Induced Productivity Differences And Patterns Of International Capital Flows," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 1-24, February.
    7. Hung Ly-Dai, 2019. "Non-linear pattern of international capital flows," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 575-600, August.
    8. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
    9. Pierre-Olivier Gourinchas & Olivier Jeanne, 2013. "Capital Flows to Developing Countries: The Allocation Puzzle," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1484-1515.
    10. Gourinchas, Pierre-Olivier & Rey, Hélène, 2014. "External Adjustment, Global Imbalances, Valuation Effects," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 585-645, Elsevier.
    11. Philippe Aghion & Peter Howitt, 2006. "Joseph Schumpeter Lecture Appropriate Growth Policy: A Unifying Framework," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 269-314, 04-05.
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    Cited by:

    1. Ly Dai Hung & Hoan Nguyen Thi Thuy, 2020. "International Capital Flows When Safe Assets Scarcity Matters," Working Papers hal-03112750, HAL.
    2. Ly Dai Hung, 2020. "A Macro-Finance Model of Government Bonds Yields in Vietnam," Working Papers hal-03133807, HAL.

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    Keywords

    International Capital Flows; Productivity Growth; Relative Convergence;
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