|Editor: Róbinson Rojas Sandford
|On Planning for Development:
Financial flows. Net resource transfers from poor to rich countries.
Report of the High Level Panel on Illicit Financial Flows from Africa, |
Comissioned by the AU/ECA Conference of Minister of Finance, Planning and Economic Development, 2015
Despite the challenges of information gathering about illicit activities, the information
available to us has convinced our Panel that large commercial corporations are by far
the biggest culprits of illicit outflows, followed by organized crime. We are also convinced
that corrupt practices in Africa are facilitating these outflows, apart from and in addition
to the related problem of weak governance capacity.
All this should be understood within the context of large corporations having the means
to retain the best available professional legal, accountancy, banking and other expertise to
help them perpetuate their aggressive and illegal activities. Similarly, organized criminal
organizations, especially international drug dealers, have the funds to corrupt many players,
including and especially in governments, and even to “capture” weak states.
All these factors underline that the critical ingredient in the struggle to end illicit
financial flows is the political will of governments, not only technical capacity.
From World Economic Situation and Prospects
Financial flows to
Net resource transfers from poor to rich countries
"The net transfer of financial resources measures the total receipts of financial and other resource
inflows from abroad and foreign investment income minus total resource outflows, including
increases in foreign reserves and foreign investment income payments. The net transfer of a
country’s financial resources is thus defined as the financial counterpart to the balance of trade in
goods and services. "
From Peterson Institute for International Economics|
P-O. Gourinderas and O. Jeanne
Capital Flows to Developing Countries: the allocation puzzle
The role of international capital flows in economic development raises important open questions.
In particular, the question asked by Robert Lucas almost twenty years ago—why so
little capital flows from rich to poor countries—received renewed interest as capital has been
flowing “upstream” from developing countries to the U.S. since 2000. This paper takes a
fresh look at the pattern of capital flows to developing countries through the lenses of the
neoclassical growth model.
Our contribution is twofold. First, we show that there is a significant discrepancy between
the predictions of the textbook neoclassical growth model for the distribution of capital
flows across developing countries and the behavior of capital flows in the data. The basic
framework predicts that countries that enjoy higher productivity growth should receive more
net capital inflows. We look at net capital inflows for a large sample of non-OECD countries
over the period 1980-2000 and find that this is not true. In fact the cross-country correlation
between productivity growth and net capital inflows is negative. The non-OECD countries
that have grown at a higher rate over 1980-2000 have tended to export (not import) more
capital. The international capital market, thus, does not allocate capital across developing
countries in the way predicted by textbook theory—a fact that we call here the “allocation
From IMF, Development and Finance, March 2007, Volume 44, Number 1|
The Paradox of Capital
Is foreign capital associated with economic growth and, if not, why does it flow "uphill"?,
Eswar Prasad, Raghuram Rajan, and Arvind Subramanian
Standard economic theory tells us that financial capital should, on net, flow from richer to poorer countries.
That is, it should flow from countries that have more physical capital per worker—and hence where the returns
to capital are lower—to those that have relatively less capital—and hence greater unexploited investment
opportunities. In principle, this movement of capital should make poorer countries better off by giving
them access to more financial resources that they can then invest in physical capital, such as equipment,
machinery, and infrastructure. Such investment should improve their levels of employment and income.
Global Capital Flows: Defying Gravity
Mangal Goswami, Jack Ree, and Ina Kota
Back to Basics
Global capital flows, including debt, portfolio equity, and direct investment–based financing,
topped $6 trillion in 2006. Global imbalances have also risen, with the United States running a current account
deficit and some emerging market countries running big surpluses. A chart-based view of where the money goes.
PPP Versus the Market: Which Weight Matters?
Two methods for measuring countries' contributions to global growth—the purchasing power parity (PPP) exchange
rate and market exchange rates—yield different results. Which one is better? When financial flows are involved,
market exchange rates are the better choice, but for other variables, the decision is less clear.
From UNCTAD, Global Investment Trends Monitor No. 5, 17 January 2011|
Global and Regional FDI Trends in 2010
From The American Economic Review, Vol 80, No 2, Papers and Proceedings of the Hundred and Second Annual
Meeting of the American Economic Association (May 1990), ppp 92-96|
Why Doesn't Capital Flow from Rich Countries to Poor Countries?
Why does it matter which combination,
if any, of the four hypotheses I have advanced
is adequate to account for the absence
of income equalizing international cap
ital flows? The central idea of virtually all
postwar development policies is to stimulate
transfers of capital goods from rich to poor
countries. Insofar as either of the human
capital-based hypotheses reviewed in Sections
I and I1 of this paper is accurate, such
transfers will be fully offset by reductions in
private foreign investment in the poor country,
by increases in that country's investments
abroad, or both. Insofar as returns on
capital are not equalized, but where return
differentials are maintained so as to secure
monopoly rents, capital transfers to poor
countries will also be fully offset by reductions
in private investments. Giving goods to
a monopolist does not reduce his interest in
exploiting potential rents.
By Joyce Meng, 2009|
Why doesn't capital flow from rich to poor countries?' (R.E. Lucas, American Economic Review Vol 80,
1990). Explain Lucas' analysis and contrast this with other analyses on the one hand, and empirical
evidence for flows since 1990 on the other.
This essay describes some possible theoretical and empirical reconciliations of the Lucas Paradox.
In general, the theoretical explanations for the “Lucas Paradox” fall into two categories. The first
category pertains to differences in fundamentals relating to the overall production structure of the
economy, including technological differences, lack of productive infrastructure and other elements
affecting total factor productivity, missing factors of production, government policies (such as tariffs,
taxes, capital controls, and non-trade barriers), and institutional structure. The second category relates
to international capital market imperfections, such as information asymmetry (home bias), sovereign
risk, and credit failures (financing frictions)
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Social Watch Annual Reports:
poverty eradication and gender justice
SWR 2012 - The Right to a Future
Growing inequalities and unregulated finances are
expropiating people everywhere from their fair share in the benefits of global
2003 - The Poor and the Market
Can the market provide the essential services needed
by the poor? The faith in privatizations as the way to reach the goals of access
to safe water, basic education and health for all is not echoed by the Social
Watch coalitions from around the world in their 2003 report on "The Poor
and the Market".
Planning for Development
UNCTAD areas of work:
Globalization and Development
Development of Africa
Least Developed Countries
Landlocked Developing Countries
Small Island Developing States
International Trade and Commodities
Investment, Technology and Enterprise Development
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Transnational Corporations Journal
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World Energy Statistics - Time Series
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list of development themes