This paper develops an empirical analysis of the relationship between capital flows and economic growth in developing countries. Empirical evidence suggest: i) there is evidence that external savings mitigates economic growth; ii) there is no evidence that capital flows foster economic growth; iii) there is no evidence that external saving and capital flows effects on the economic growth depend on the levels of institutional development, financial development, trade openness, macroeconomic stability and human capital. One possible explanation for these results is the possibility of capital flows to developing countries lead to macroeconomic instability, financial crises and currency appreciation, with adverse effects on economic growth.
capital flows; economic growth; developing countries
