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

Stefano Manzocchi and Philippe Martin

No 1400, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Capital Movements; Developing Countries; Growth Theory (search for similar items in EconPapers)
JEL-codes: F21 O30 O40 (search for similar items in EconPapers)
Date: 1996-05
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Citations: View citations in EconPapers (4)

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Working Paper: Are Capital Flows Consistent with the Neoclassical Growth Model? Evidence from a Cross-section of Developing Countries (1996)
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