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The Relationship between Macroeconomic Rates of Return of Investment and the Speed of Convergence: A Panel Data Analysis

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  • José Alves
  • Matilde Santos

Abstract

We analyse the impact of macroeconomic rates of return of investment on time-varying beta convergence coefficients. This paper aims to establish and empirically demonstrate a relationship between macroeconomic rates of return of investment and the speed of convergence of economies to their own steady state. First, we use the four different kinds of macroeconomic rates found in Afonso et al (2025), then we compute the time-varying beta convergence coefficients for two different time lags, one of ten years and another of five, all according to the approach of Schlicht (2021). Finally, we regress the betas on the macroeconomic rates of return, controlling for some variables. Our panel data set contains 16 OECD countries and spans the years starting in 1980 and ending in 2022. We conclude that the impact of the macroeconomic rates of return on the speed of convergence is mostly positive but differs in magnitude depending on which kind of macroeconomic rate of return and on which set of control variables accompanies the regression.

Suggested Citation

  • José Alves & Matilde Santos, 2025. "The Relationship between Macroeconomic Rates of Return of Investment and the Speed of Convergence: A Panel Data Analysis," Working Papers REM 2025/0397, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp03972025
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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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