Abstract
From most known theoretical considerations, financial globalization should promote capital flows to developing countries and this should increase welfare and growth. However, in aggregate, the amount of North-South capital flows remains to be rather small and the growth effects of financial liberalization show to be mixed at best (Kose et al., 2009). On a more refined level, we instead observe net flows of foreign direct investment (FDI) into developing economies, but at the same time, financial capital is flowing into the opposite direction – from developing and emerging economies into industrial countries – in almost equal amount.
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