Foreign Capital and Economic Growth

摘要: IN ONE OF HIS most memorable and widely quoted passages, John Maynard Keynes extolled the virtues not only of trade integration but also financial when he wrote, in 1920, fabled Englishman who could "adventure his wealth ... new enterprises any quarter world, share, without exertion or even trouble, their prospective fruits advantages." (1) Consistency was, course, a Keynesian virtue, 1933, one less Keynes's musings on globalization turned more melancholy, skeptical: "I sympathize with those would minimize, rather than maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel--these are things which should nature be international. But let goods homespun whenever it is reasonably conveniently possible...." He reserved deepest skepticism for globalization, warning, "and, above all, finance primarily national." (2) Which was right? 1920 1933? And why? Or, to put mundanely, does foreign capital play helpful, benign, malign role growth? The question has fueled passionate debates economists, policymakers, members civil society. It gained importance recent years because curious, seemingly perverse, phenomenon global flowing "uphill" from poorer richer countries. relevance beyond current conjuncture goes heart process development it. enduring policy as developing countries try decide whether open themselves up if so, what form degree. [FIGURE 1 OMITTED] We undertake an empirical exploration this question, beginning some stylized facts that motivate our analysis. account balance, equivalent country's saving its investment, provides summary measure net amount capital, including private official out country. (3) Figure shows cross-border flows, measured sum, relative world GDP, national surpluses have surpluses, been steadily increasing over last three half decades. Although well advanced era leading World War I, (4) there appear important differences episode: today's involves greater number countries; flows sizable, large each direction well; these encompass wider range sophisticated instruments. apparent perversity characteristic, puzzling, about today. (5) 2 In benchmark neoclassical model, flow rich relatively high capital-labor ratios poor low ratios. Yet, top panel figure suggests, average income per capita running (with richest country year, weighted by calculating average) trending downward. Correspondingly, deficit countries, analogous way, trended upward. Indeed, century surplus fallen below Not quantities model predict--the famous paradox pointed Robert Lucas (6)--but few …