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Are Capital Flows Consistent with the Neoclassical Growth Model? Evidence from a Cross-section of Developing Countries

Author

Listed:
  • Stefano Manzocchi
  • Philippe Martin

    (CEPR - Center for Economic Policy Research, IHEID - Graduate Institute of International and Development studies)

Abstract

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.

Suggested Citation

  • Stefano Manzocchi & Philippe Martin, 1996. "Are Capital Flows Consistent with the Neoclassical Growth Model? Evidence from a Cross-section of Developing Countries," Working Papers hal-03607870, HAL.
    • Handle: RePEc:hal:wpaper:hal-03607870
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    Cited by:

    1. Pierre-Olivier Gourinchas & Olivier Jeanne, 2013. "Capital Flows to Developing Countries: The Allocation Puzzle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1484-1515.
    2. Alberto Bagnai & Stefano Manzocchi, 1999. "Current-Account Reversals in Developing Countries: The Role of Fundamentals," Open Economies Review, Springer, vol. 10(2), pages 143-163, May.

    More about this item

    Keywords

    Capital Movements; Developing; Countries; Growth Theory;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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