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International Capital Mobility, Public Investment and Economic Growth

  • Richard H. Clarida

This paper presents a neoclassical model of international capital flows, public investment, and economic growth. Because public capital is non-traded and is imperfectly substitutable for private capital, the open economy converges only gradually to the Solow steady-state notwithstanding the fact that international capital mobility is perfect. Along the convergence path, the economy initially runs a current account deficit that reflects a consumption boom and a surge in public spending. Over time, the rate of public investment declines as does the rate of growth in the standard measure of multifactor productivity in the private sector, the Solow residual.

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File URL: http://www.nber.org/papers/w4506.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4506.

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Date of creation: Oct 1993
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Publication status: published as With Ronald Findlay, published as "After Maastricht: Public Investment, Economic Integration and International Capital Mobility", Economica, Vol. 61, no. 243 (1994): 319-329.
Handle: RePEc:nbr:nberwo:4506
Note: IFM
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  1. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  2. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  3. Neil R. Ericsson, 1991. "Cointegration, exogeneity, and policy analysis: an overview," International Finance Discussion Papers 415, Board of Governors of the Federal Reserve System (U.S.).
  4. John F. Helliwell, 1992. "Trade and Technical Progress," NBER Working Papers 4226, National Bureau of Economic Research, Inc.
  5. Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
  6. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  7. Barro, Robert J. & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1994. "Capital Mobility in Neoclassical Models of Growth," CEPR Discussion Papers 1019, C.E.P.R. Discussion Papers.
  8. Clarida, Richard H & Findlay, Ronald, 1992. "Government, Trade, and Comparative Advantage," American Economic Review, American Economic Association, vol. 82(2), pages 122-27, May.
  9. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  10. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  11. Robert Ford & Pierre Poret, 1991. "Infrastructure and Private-Sector Productivity," OECD Economics Department Working Papers 91, OECD Publishing.
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