We identify the determinants of capital movements in an ‘augmented-Solow’ model where capital mobility is restricted to a subset of capital assets. We then test the prediction of the neoclassical model and find that it is consistent with the evidence on net capital flows in a cross-section of developing countries over the period 1960–82. We find that this is no longer true after 1982, however: the episodes of foreign debt repudiation and the world financial crisis of the early 1980s are the most natural candidates for an explanation of this pattern.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1400.
Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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