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Growth Theory and the Effects of Capital Flows

In: Foreign Capital in Developing Economies

Author

Listed:
  • Stefano Manzocchi

    (University of Perugia)

Abstract

This chapter deals with the long-run effects of international capital flows from the perspective of growth theory. Our main concern is with the impact of capital flows on growth and ‘convergence’, a concept which is variously defined according to the underlying theoretical framework; as in Chapter 3 we outline different models that are of general relevance, but we then apply them to the case of developing economies. As we focus on the long run, the use of external capital as an instrument for consumption-smoothing is neglected. However, while in Sections 4.1 and 4.2 we rule out the possibility that a country mortgages a constant stream of future (per capita) income to increase current consumption, this possibility is allowed for in the model of Section 4.3. This enriches the range of feasible outcomes stemming from integration in world capital markets.

Suggested Citation

  • Stefano Manzocchi, 1999. "Growth Theory and the Effects of Capital Flows," Palgrave Macmillan Books, in: Foreign Capital in Developing Economies, chapter 4, pages 54-76, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-27620-2_4
    DOI: 10.1007/978-1-349-27620-2_4
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