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...

This paper investigates the effects of input-trade liberalization on firms’ decision to upgrade foreign technology embodied in imported capital goods. We develop a simple theoretical model of endogenous technology adoption, heterogeneous firms and imported inputs. Assuming that imported intermediate goods and high-technology are complementary and the existence of technology adoption fixed costs...

The effects of capital account openness on economic growth may vary across countries. Some countries may not have in place the constellation of institutions required to fully benefit from open capital accounts. Other countries may realize only small marginal improvements in the wake of capital account liberalization. This paper presents evidence of an inverted-U shaped relationship between the ...