The private capital-flow problem

The private capital-flow problem of developing countries in general has been starkly described as one in which "there is either too much capital or too little, and it is mostly hot rather than cold" (Dornbusch, 1998: 197). Although there is some evidence of increasing instability in short-term capital flows in the LDCs in the 1990s (UNCTAD, 2000: chart 5), the LDCs have not experienced the kind of hot surges and sudden withdrawals of external finance that have characterized emerging markets in Latin America and East Asia during this period. Instead, for almost all LDCs, the private capital-flow problem is that the international community of investors and lenders, which includes a small stratum of residents of the LDCs themselves as well as non-residents, places very little of its funds in LDCs.

Related Subject(s): Economic and Social Development
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