DP1400 Are Capital Flows Consistent with the Neoclassical Growth Model? Evidence from a Cross-section of Developing Countries
|Author(s):||Stefano Manzocchi, Philippe Martin|
|Publication Date:||May 1996|
|Keyword(s):||Capital Movements, Developing Countries, Growth Theory|
|JEL(s):||F21, O30, O40|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1400|
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.