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

CEPR Discussion Paper No. 1400

Posted: 12 Dec 1996

See all articles by Stefano Manzocchi

Stefano Manzocchi

Luiss University - Department of Economics and Finance

Philippe Martin

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Date Written: May 1996

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.

JEL Classification: F21, O30, O40

Suggested Citation

Manzocchi, Stefano and Martin, Philippe, Are Capital Flows Consistent with the Neoclassical Growth Model?: Evidence from a Cross-Section of Developing Countries (May 1996). CEPR Discussion Paper No. 1400. Available at SSRN: https://ssrn.com/abstract=4502

Stefano Manzocchi

Luiss University - Department of Economics and Finance ( email )

Viale Romania, 32
Rome, 00197
Italy

Philippe Martin (Contact Author)

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4313 6385 (Phone)
+33 1 4313 6382 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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