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Economic convergence is the concept that poor economies will eventually catch up with the developed countries
Finance & Accounting
Pages 12 (3012 words)
Introduction Economic convergence is the concept that poor economies will eventually catch up with the developed countries. Under this hypothesis, the GDP Growth rates of the poorer economies will be higher than the growth rates of the rich countries and as a result of this poor and rich economies will finally converge with each other.
Chile is one of the smaller countries in South American region with one of the most vibrant economies in the region. It is termed as an upper middle income country as per the standards of World Bank. It is also considered as most stable and prosperous nations in the region due to its sustained economic performance. It has been argued that the Chile’s government has kept constant policies sustained over the period of almost three decades witnessing reduction in poverty to almost half. This impressive economic performance of the country has resulted into the narrowing of the gap between Chile and other developed countries as accelerated rate of growth has provided Chile much needed convergence to be part of the fastest growing countries. This literature review will provide a review of existing literature on the subject of economic convergence, growth and financial development in Chile. By reviewing the current literature, this review will offer insight into economic convergence of Chile. Macroeconomic Convergence- Theoretical Framework As mentioned above, there are two different concepts of macroeconomic convergence i.e. beta and sigma convergence. Beta convergence signifies convergence through the per capita income and the later is through convergence of cross sectional dispersion of per capita income. ...
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