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International Capital Mobility, Public Investment and Economic Growth

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  • Richard H. Clarida

Abstract

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.

Suggested Citation

  • Richard H. Clarida, 1993. "International Capital Mobility, Public Investment and Economic Growth," NBER Working Papers 4506, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4506
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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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