Productivity-Enhancing Reforms, Private Capital Inflows, and Real Interest Rates in Africa

Productivity Growth and Capital Flows: The Dynamics of Reforms

Why doesn’t capital flow into fast-growing countries? This paper provides a model incorporating heterogeneous producers and underdeveloped domestic financial markets to study the joint dynamics of total factor productivity (TFP) and capital flows. When a large-scale reform eliminates idiosyncratic distortions and liberalizes capital flows, the TFP of our model economy rises gradually and capita...

Private Payment Systems, Collateral, and Interest Rates

Recent developments in private payments arrangements, particularly at the wholesale level, (including recent innovations in China) challenge central banks’ longstanding monopoly on the provision of the ultimate means of settlement for financial transactions. This paper examines competition between public payments arrangements and private intermediaries, and the effect on central banks’ role in ...

Do High Interest Rates Stem Capital Outflows?

Conventional wisdom posits that high interest rates stem capital flight. But if higher interest rates increase the probability of debt default, they might have anti-orthodox effects. This note develops a framework for evaluating conditions under which this might occur.  2000 Elsevier Science S.A. All rights reserved.

Capital Account Liberalization, Real Wages, and Productivity

For three years after developing countries open their stock markets to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of seven. No such increase occurs in a control group of developing countries that do not liberalize. The temporary increase in the growth rate of the real wage permanently drives up the level of avera...

Capital inflows and investment in developing countries