The Role of Information for International Capital Flows: New Evidence from the SDDS

27  June 2013    4:00 pm

Konstantin M. Wacker, WU Wien

Venue

wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)

Description

The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyse the contributions from technological change at the industry level to an economy's aggregate growth performance. Our derivation of total TFP growth entails three major improvements over the traditional Solow residual approach. First, we allow for non-constant returns to scale as well as changes in the utilisation of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from industry level to macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms-of-trade shocks. Our calculations for the sample of 10 Eastern European EU Member States over the time period from 1995 to 2009 are based on the newly available World Input-Output Database (WIOD).

Keywords: determinants of capital flows, information, panel data, risk, SDDS, IMF, FDI, portfolio investment, spatial econometrics

JEL classification: C33, F21, G14


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