THE IMPACT OF UNCERTAIN CAPITAL FLOWS ON ECONOMIC GROWTH N DEVELOPING COUNTRIES: AN EMPIRICAL ANALYSIS FOR THE 1990s

This paper examines the impact of uncertain capital flows on growth to a group of 60 developing countries during the 1990s. We distinguish between total capital flows, official capital flows and private capital flows. For the three types of capital flows we derive a yearly uncertainty measure. We use the yearly uncertainty measures in ordinary least squares estimates, as well as system GMM estimates to explain the impact of uncertain capital flows on growth. Both types of estimates suggest that uncertain capital flows have a negative effect on growth in developing countries. JEL codes: F21, F34, F35 * Corresponding author. Robert Lensink is at the Faculty of Economics, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands. He is also External CREDIT Fellow. Email: [email protected] ** CREDIT University of Nottingham, UK.