Do Banks have a Role to Play in Foreign Non-Debt-Creating Transfers of Financial Resources

  • Walter G. Frehner


Industrial development for most countries is not possible without external financing. Typically, during the early stages of development a country will tend to borrow because investment opportunities exceed available domestic savings. At a later stage, as the country grows and domestic production catches up with domestic expenditure, the country’s net exports are sufficient to match and then exceed the external borrowing. The country is then in a position to repay its debt.


Foreign Direct Investment Stock Market Cash Flow Capital Inflow Equity Investment 
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Notes and References

  1. 1.
    H. de Soto elaborated in The Other Path that due to Peru’s overregulated and arbitrary formal economy, an informal sector developed, creating fertile ground for entrepreneurship and totally oriented towards free market principles with no regulations. Such informal sectors exist in many countries worldwide and not only in developing countries. H. de Soto, The Other Path. The Invisible Revolution in the World (NY: Harper & Row. 1989).Google Scholar
  2. 15.
    Compounded value of flight capital assets assuming pre-tax return of 6-month Libor. Baker Countries are the 15 principal middle-income less-developed countries in financial difficulty, as targeted by US Treasury Secretary James Baker; Financial Times, 4 Aug. 1989; Morgan Guaranty.Google Scholar

Copyright information

© Ecole des Hautes Etudes Commerciales 1993

Authors and Affiliations

  • Walter G. Frehner

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