Private capital flows and developing countries

The purpose of this paper is to document trends in private capital flows to developing countries since 1982 and provide a comprehensive explanation of the underlying causes. Different sets of inter-related factors are responsible for the decline in private bank lending and the more or less sustained flows of FDI. The paper also evaluates the individual and combined effect of these factors and anticipates the possible impact of such recent world events as the Persian Gulf war and the restructuring in the East. Finally, we will discuss the consequences of these trends, including the foreign exchange shortage and domestic economic decline, and offer some policy implications for developing countries. -from Authors