Abstract
Over the past decade, the flow of foreign capital to developing countries has declined precipitously. The inflow of foreign capital to finance balance-of-payments deficits on current account depends both on a country’s desire to spend more than its income and on the willingness of the rest of the world to finance the concomitant current account deficit. In other words, foreign capital inflows are determined simultaneously by both the demand for and the supply of foreign savings…
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