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

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.
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Dates and versions

hal-03607870 , version 1 (14-03-2022)

Licence

Attribution - NonCommercial - NoDerivatives - CC BY 4.0

Identifiers

  • HAL Id : hal-03607870 , version 1
  • SCIENCESPO : 2441/9346

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Stefano Manzocchi, Philippe Martin. Are Capital Flows Consistent with the Neoclassical Growth Model? Evidence from a Cross-section of Developing Countries. 1996. ⟨hal-03607870⟩
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