Hostname: page-component-5d84bcc8dc-mk9wr Total loading time: 0 Render date: 2026-09-04T18:04:49.727Z Has data issue: false hasContentIssue false
  • English
  • Français

FINANCIAL GLOBALIZATION AND ECONOMIC GROWTH

Published online by Cambridge University Press:  03 July 2012

Delfim Gomes Neto
Delfim Gomes Neto*
Affiliation:
Universidade do Minho and NIPE
*
Address correspondence to: Delfim Gomes Neto, Universidade do Minho, Escola de Economia e Gestão, Campus de Gualtar, 4710-057 Braga, Portugal; e-mail: dneto@eeg.uminho.pt.
Get access Rights & Permissions [Opens in a new window]

Abstract

Using a two-sector endogenous growth model, the speed of convergence is determined primarily by the gap in rates of return between physical and human capital. In closed economies, for a typical situation of having relatively less physical capital than in a steady state, the return on physical capital will be significantly high, whereas the return on human capital will be relatively low. This gap in rates of return is quite large when the economy is not at its steady state. In open economies, where human capital is nontradable, the gap in rates of return is small, as is the gap between the international interest rate (which is less than the closed economies return on physical capital) and the return on human capital. Convergence in open economies will be relatively slow, and convergence in closed economies will be relatively fast, and therefore there is little gain from financial liberalization.

Keywords

Capital MobilitySpeed of ConvergenceWelfare GainsOpen versus Closed Economies

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 3 , April 2014 , pp. 526 - 547
Copyright
Copyright © Cambridge University Press 2012 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Abel, A. and Blanchard, O. (1983) An intertemporal model of saving and investment. Econometrica 51, 675–692.CrossRefGoogle Scholar
Barro, R., Mankiw, N. G., and Sala-i-Martin, X. (1995) Capital mobility in neoclassical models of growth. American Economic Review 85, 103–115.Google Scholar
Barro, R. and Sala-i-Martin, X. (2004) Economic Growth, 2nd ed.Cambridge, MA: MIT Press.Google Scholar
Bond, E., Wang, P., and Yip, C. (1996) A general two-sector model of endogenous growth with human and physical capital: Balanced growth and transitional dynamics. Journal of Economic Theory 68, 149–173.CrossRefGoogle Scholar
Bruno, M. (1976) The two-sector open economy and the real exchange rate. American Economic Review 66, 566–577.Google Scholar
Farmer, R. and Lahiri, A. (2006) Economic growth in an interdependent world economy. Economic Journal 116, 969–990.CrossRefGoogle Scholar
Fisher, W. (2010) Relative wealth, growth, and transitional dynamics: The small open economy case. Macroeconomic Dynamics 14 (Supplement 2), 224–242.CrossRefGoogle Scholar
Gourinchas, P.-O. and Jeanne, O. (2006) The elusive gains from international financial integration. Review of Economic Studies 73, 715–741.CrossRefGoogle Scholar
King, R. and Rebelo, S. (1993) Transitional dynamics and economic growth in the neoclassical model. American Economic Review 83, 908–931.Google Scholar
Lucas, R. (1988) On the mechanics of economic development. Journal of Monetary Economics 22, 3–42.CrossRefGoogle Scholar
Mulligan, C. B. and Sala-i-Martin, X. (1993) Transitional dynamics in two-sector models of endogenous growth. Quarterly Journal of Economics 108, 737–773.CrossRefGoogle Scholar
Obstfeld, M. and Rogoff, K. (1996) Foundations of International Macroeconomics. Cambridge, MA: MIT Press.Google Scholar
Ortigueira, S. and Santos, M. (1997) On the speed of convergence in endogenous growth models. American Economic Review 87, 383–399.Google Scholar
Papageorgiou, C. and Perez-Sebastian, F. (2007) Is the asymptotic speed of convergence a good proxy for the transitional growth path? Journal of Money, Credit and Banking 39, 1–24.CrossRefGoogle Scholar
Rebelo, S. (1991) Long-run policy analysis and long-run growth. Journal of Political Economy 99, 500–521.CrossRefGoogle Scholar
Summers, L. (1981) Taxation and corporate investment: A q-theory approach. Brooking Papers on Economic Activity (No. 1), 67–127.CrossRefGoogle Scholar
Turnovsky, S. (1996) Endogenous growth in a dependent economy with traded and nontraded capital. Review of International Economics 4, 300–321.CrossRefGoogle Scholar
Turnovsky, S. (2002) Knife-edge conditions and the macrodynamics of small open economies. Macroeconomic Dynamics 6, 307–335.CrossRefGoogle Scholar