TY  - GEN
AB  - A surprisingly large number of countries have been able to finance a significant fraction of domestic investment using foreign finance for extended periods. While many of these episodes are in low-income countries where official finance is more important than private finance, we also identify a number of episodes where a substantial fraction of domestic investment was financed via private capital inflows. That said, we find that foreign savings are not a good substitute for domestic savings. More often than not, episodes of large and persistent current account deficits do not end happily. Rather, they end abruptly with compression of the current account, real exchange rate depreciation, and a sharp slowdown in investment. We conclude that financing growth and investment out of foreign savings, while not impossible, is risky.
AU  - Cavallo, Eduardo
AU  - Eichengreen, Barry J.
AU  - Panizza, Ugo
CY  - Geneva
DA  - 2016
DA  - 2016
DO  - 10.71609/iheid-bt28-y284
DO  - doi
ID  - 294134
L1  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf
L1  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf?subformat=pdfa
L2  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf
L2  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf?subformat=pdfa
L4  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf
L4  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf?subformat=pdfa
LK  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf
LK  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf?subformat=pdfa
N2  - A surprisingly large number of countries have been able to finance a significant fraction of domestic investment using foreign finance for extended periods. While many of these episodes are in low-income countries where official finance is more important than private finance, we also identify a number of episodes where a substantial fraction of domestic investment was financed via private capital inflows. That said, we find that foreign savings are not a good substitute for domestic savings. More often than not, episodes of large and persistent current account deficits do not end happily. Rather, they end abruptly with compression of the current account, real exchange rate depreciation, and a sharp slowdown in investment. We conclude that financing growth and investment out of foreign savings, while not impossible, is risky.
PB  - The Graduate Institute
PP  - Geneva
PY  - 2016
PY  - 2016
T1  - Can countries rely on foreign saving for investment and economic development?
TI  - Can countries rely on foreign saving for investment and economic development?
UR  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf
UR  - https://repository.graduateinstitute.ch/record/294134/files/HEIDWP07-2016_CFD.pdf?subformat=pdfa
Y1  - 2016
ER  -