Staff Reports
The Global Financial Resource Curse
Number 915
February 2020

JEL classification: E44, F21, F43, F62, O24, O31

Authors: Gianluca Benigno, Luca Fornaro, and Martin Wolf

Since the late 1990s, the United States has received large capital flows from developing countries and experienced a productivity growth slowdown. Motivated by these facts, we provide a model connecting international financial integration and global productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for U.S. non-tradable goods. This induces a reallocation of U.S. economic activity from the tradable sector to the non-tradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth. We dub this effect the global financial resource curse. The model thus offers a new perspective on the consequences of financial globalization, and on the appropriate policy interventions to manage it.

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AUTHOR DISCLOSURE STATEMENT(S)
(1) Every submitted article should state the sources of financial support for the particular research it describes. If none, that fact should be stated.

(2) Each author of a submitted article should identify each interested party from whom he or she has received significant financial support, summing to at least $10,000 in the past three years, in the form of consultant fees, retainers, grants and the like. The disclosure requirement also includes in-kind support, such as providing access to data. If the support in question comes with a non-disclosure obligation, that fact should be stated, along with as much information as the obligation permits. If there are no such sources of funds, that fact should be stated explicitly. An “interested” party is any individual, group, or organization that has a financial, ideological, or political stake related to the article.

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(5) Each author must disclose if another party had the right to review the paper prior to its circulation.

(6) For published articles, information on relevant potential conflicts of interest will be made available to the public.

Gianluca Benigno
I have not received any financial support for this research.
I have not received any sources of funds for this research.
I hold no paid or unpaid position in any "relevant" organization.
No close relative or partner meets any of the criteria in any of the above disclosures.
No party had the right to review the paper prior to its circulation.
I agree that this disclosure statement will be made available to the public.

Luca Forno
I have received funding from the European Research Council Starting Grant 851896 and the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563).
I hold no paid or unpaid position in any "relevant" organization.
No close relative or partner meets any of the criteria in any of the above disclosures.
No party had the right to review the paper prior to its circulation.
I agree that this disclosure statement will be made available to the public.

Martin Wolf
I have not received any financial support for this research.
I have not received any sources of funds for this research.
I hold no paid or unpaid position in any "relevant" organization.
No close relative or partner meets any of the criteria in any of the above disclosures.
No party had the right to review the paper prior to its circulation.
I agree that this disclosure statement will be made available to the public.