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Financial globalization, convergence and growth

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Abstract

We provide evidence that the composition of foreign capital, measured by the ratio foreign direct investment over total liabilities, a.ects growth directly and through the speed of convergence. Developing countries benefit relatively more as their initial GDP is smaller. The dataset comprises the period 1970-2004 and 96 countries, and the results are robust to di.erent measures of the composition of foreign capital, restricted time period, developing countries, and alternative explanations of convergence and growth. These results are consistent with the neoclassical growth model with credit constraints presented in this paper, in which the composition of foreign capital a.ects the transition dynamics through a positive e.ect on the speed of convergence and steady state GDP.

Suggested Citation

  • Delfim Gomes Neto & Francisco José Veiga, 2008. "Financial globalization, convergence and growth," NIPE Working Papers 07/2008, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:07/2008
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    File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2008/NIPE_WP_7_2008.PDF
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    Cited by:

    1. Paulo Bastos & Natália P. Monteiro, 2011. "Managers and Wage Policies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 957-984, December.
    2. Kayalvizhi, P.N. & Thenmozhi, M., 2018. "Does quality of innovation, culture and governance drive FDI?: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 34(C), pages 175-191.
    3. Thanh tam Nguyen Huu, 2016. "Determinant factors of TFP convergence: Evidence from Vietnamese manufacturing firms from 2000-2012," Economics Bulletin, AccessEcon, vol. 36(3), pages 1569-1579.
    4. Fernando Alexandre & Miguel Portela & Carla Sá, 2008. "Admission conditions and graduates' employability," NIPE Working Papers 16/2008, NIPE - Universidade do Minho.
    5. Mostefa BELMOKADDEM & Yassine Zakaria GHOUALI & Mohammed Seghir GUELLIL & Mohammed Abbes SAHRAOUI, 2014. "Causal Interactions Between Fdi, Electricity Consumption And Economic Growth: Evidence From Dynamic Panel Co-Integration Models," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 3(2), pages 1-30, DECEMBER.

    More about this item

    Keywords

    composition of foreign capital; speed of convergence; growth.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • 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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