The Macroeconomic Impact of External Finance: Summary of Findings and Model Simulations

Abstract

In Chapters 4 and 5, two booms in foreign capital inflows were analysed: the public sector lending boom of the late 1970s/early 1980s, and the private foreign investment boom which started in the late 1980s. Various effects related to the inflows of external capital were identified and explored, and it can be concluded that the two booms had some similar impacts, but that there were also major differences between the two periods. This confirmed the hypothesis that it is not only the level of the capital inflows that matters, but also, and maybe more importantly, the type of capital that is received.