The globalization of capital and economic development

Abstract

The globalization of capital has been broadly studied due to its effects in economic development. Both the theoretical and empirical literature offers mixed results and lacks a comprehensive concept of globalization because it focuses mostly on financial opening. Under this context empiric tests are made to measure globalization and financial opening using nominal private capital flows and interest rate equilibrium. We find a positive and significant relationship of private flows with economic development and no relationship with the rest of indicators. At least we do not find a negative nexus. Moreover, we find that the richer the country, the higher the effect of capital on globalization.