This paper is motivated by the unparalleled increase in foreign direct investment to emerging market economies of the last 25 years. Using a large cross-country time-series data set, we evaluate the dependence of foreign direct investment on global factors, or worldwide sources of risk (i.e.,...

How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966 to 1997. We find that a small amount of capital flows from rich countries to poor...

Capital flows to developing countries are small and mostly take the form of loans rather than direct foreign investment. Kraay, Loayza, and Serven build a simple model of North-South capital flows that highlights the interplay between diminishing returns, production risk, and sovereign risk. The...

The authors analyze the unparalleled increase in foreign direct investment to emerging market economies in the past 25 years. Using a large cross-country time-series data set, the authors evaluate the dependence of foreign direct investment on global factors or worldwide sources of risk (that...

The authors consider external sustainability from the perspective of equilibrium in net foreign asset positions. Under their approach, an external situation is sustainable if it is consistent with international and domestic investors' achieving their desired portfolio allocation across...

The 1994 crisis in Mexico, developments in East Asia, and persistent turmoil in world financial markets have dramatized the role of external imbalances in macroeconomic crises. Some believe that the current account should be kept from rising beyond a sustainable level, some that a current...