IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/427.html
   My bibliography  Save this paper

The net external asset position and economic growth: some simple correlations for 116 countries

Author

Listed:
  • Scheide, Joachim

Abstract

Two datasets are combined to analyze a few standard implications of the theory of economic growth. Real GDP per capita (RGDP) and the investment share (IS) are taken from Summers, Heston (1988), the ratio of net external assets to GDP (=NAP) are calculated by Sinn (1990). For the period 1970-1985, the data for a sample of 116 countries are analyzed; in addition, the group of industrial countries and highly indebted countries is discussed. One hypothesis suggests that low-income countries catch up in the process of development, and that this is, in part, made possible by the supply of capital from abroad. The data show indeed that poor countries borrow more; however, they do not grow faster than rich countries. Furthermore, those countries which show relatively high growth are not large capital importers. In general, the ratio of net external assets to GDP does not help to predict how fast a country will grow in the future; this also means that high debt is not a burden in the sense that a country will grow less than average. These results hold for the entire sample and for the two subgroups of countries as well. A second analysis includes the investment performance. A high investment share coincides with high economic growth in the large sample, but not for industrial or highly indebted countries. The hypothesis that a low NAP goes along with a high IS is not supported by the data; the opposite is true for industrial and highly indebted countries. It seems that large creditor countries (high NAP) also invest more at home. In general, the analysis does not support the - plausible - ideas of cycles of external debt or the stages hypothesis in the balance of payments which suggest that low-income countries tend to run a current account deficit while investing more and growing faster than other countries; such performances seem to be the exception. The fact that the level of net external assets does not, per se, say anything about the strength of economic growth implies that high debt does not mean that a country has large problems, just as the fact that a country runs a high surplus in the current account is not - by itself - a sign of strength. Therefore, conclusions for economic policy must be based on more than just figures on net external assets or current account balances.

Suggested Citation

  • Scheide, Joachim, 1990. "The net external asset position and economic growth: some simple correlations for 116 countries," Kiel Working Papers 427, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkwp:427
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/551/1/042369401.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sinn, Stefan, 1989. "Economic models of policy-making in interdependent economies: An alternative view on competition among policies," Kiel Working Papers 390, Kiel Institute for the World Economy (IfW Kiel).
    2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    3. Horst Siebert, 1989. "The half and the full debt cycle," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(2), pages 217-229, June.
    4. Robert Summers & Alan Heston, 1988. "A New Set Of International Comparisons Of Real Product And Price Levels Estimates For 130 Countries, 1950–1985," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(1), pages 1-25, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    2. Steven N. Durlauf & Andros Kourtellos & Chih Ming Tan, 2008. "Empirics of Growth and Development," Chapters, in: Amitava Krishna Dutt & Jaime Ros (ed.), International Handbook of Development Economics, Volumes 1 & 2, volume 0, chapter 3, Edward Elgar Publishing.
    3. G Cameron, 1996. "Innovation and Economic Growth," CEP Discussion Papers dp0277, Centre for Economic Performance, LSE.
    4. Ben Fine, 1998. "Endogenous Growth Theory: A Critical Assessment," Working Papers 80, Department of Economics, SOAS University of London, UK.
    5. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
    6. Neri, F., 2001. "Schooling Quality and Economic Growth," Economics Working Papers wp01-06, School of Economics, University of Wollongong, NSW, Australia.
    7. Ben-David, Dan, 1996. "Trade and convergence among countries," Journal of International Economics, Elsevier, vol. 40(3-4), pages 279-298, May.
    8. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    9. Gimenez, G. & Sanau, J., 2009. "Investment, Human Capital and Institutions: A Multi-equational Approach for the Study of Economic Growth, 1985-2000," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).
    10. Steven Durlauf, 2002. "Policy Evaluation and Empirical Growth Research," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.),Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 6, pages 163-190, Central Bank of Chile.
    11. Emerson Marinho & Maurício Benegas & Flávio Ataliba, 2005. "Vantagem Comparativa Dinâmica E Crescimento Endógeno Numa Economia Com Dois Setores: Agrícola E Industrial," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 141, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    12. Mohsin S. Khan, 1996. "Government Investment and Economic Growth in the Developing World," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 35(4), pages 419-439.
    13. Ulaşan, Bülent, 2012. "Cross-country growth empirics and model uncertainty: An overview," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-69.
    14. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    15. Fang Zheng & Youngho Chang, 2019. "Human Capital and Productivity Growth in ASEAN Countries for 2000-2010: A Malmquist Index Analysis," Shanlax International Journal of Economics, Shanlax Journals, vol. 7(4), pages 1-8, September.
    16. Levine, Ross & Renelt, David, 1991. "Cross-country studies of growth and policy : methodological, conceptual, and statistical problems," Policy Research Working Paper Series 608, The World Bank.
    17. Cem Ertur & Thiaw Kalidou, 2005. "Growth and Spatial Dependence - The Mankiw, Romer and Weil model revisited," ERSA conference papers ersa05p660, European Regional Science Association.
    18. Luciano Nakabashi & Lízia de Figueiredo, 2005. "Economic growth, convergence and quality of human capital formation system," Textos para Discussão Cedeplar-UFMG td265, Cedeplar, Universidade Federal de Minas Gerais.
    19. Sebastian Edwards, 1994. "Trade and Industrial Policy Reform in Latin America," NBER Working Papers 4772, National Bureau of Economic Research, Inc.
    20. Yew, Siew Ling & Zhang, Jie, 2009. "Optimal social security in a dynastic model with human capital externalities, fertility and endogenous growth," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 605-619, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:427. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.