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Capital Flows and Growth in Developing Countries: Recent Empirical Evidence

  • Marcelo Soto

Are capital inflows associated with faster income growth? There are a large number of empirical studies that identify the most relevant determinants of a country’s growth rate. However, this literature has not explored the growth impact of the various types of capital inflows. The present study analyses the effects of the different components of private capital inflows on the growth of 44 developing countries. A dynamic panel with yearly data is estimated during the 1986-97 period. After controlling for the variables traditionally used in growth regressions, the following main conclusions emerge. First, foreign direct investment and portfolio equity flows exhibit a robust positive correlation with growth. Second, portfolio bond flows are not significantly linked to economic growth. Finally, in economies with undercapitalised banking systems, bank-related inflows are negatively correlated with the growth rate. This result holds for both short- and long-term bank-related ... Les entrées de capitaux vont-elles de pair avec une accélération de la croissance des revenus ? Nombreuses sont les études empiriques qui identifient les principaux déterminants du taux de croissance d’un pays. Néanmoins, ces travaux n’ont pas étudié l’incidence sur la croissance des différents types d’entrées de capitaux. Ce Document analyse les effets sur la croissance des diverses composantes des entrées de capitaux privés pour 44 pays en développement. Une série dynamique de données annuelles est estimée sur la période 1986-97. Après neutralisation des variables généralement utilisées dans les régressions de croissance, plusieurs conclusions se dégagent : tout d’abord, l’investissement direct étranger et les prises de participation (flux de portefeuille en actions) sont corrélés de façon positive et robuste avec la croissance. Ensuite, les flux de portefeuille en obligations ne montrent pas de liens significatifs avec la croissance. Enfin, dans les économies dont le système ...

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File URL: http://dx.doi.org/10.1787/633871307443
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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 160.

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Date of creation: Jul 2000
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Handle: RePEc:oec:devaaa:160-en
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  1. Francisco Rodriguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338 National Bureau of Economic Research, Inc.
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  8. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  9. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  10. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  11. De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, vol. 63(1), pages 59-83, October.
  12. Goodfriend, Marvin & McDermott, John, 1998. "Industrial Development and the Convergence Question," American Economic Review, American Economic Association, vol. 88(5), pages 1277-89, December.
  13. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  14. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
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