Non-FDI Capital Inflows in Low-Income Developing Countries: Catching the Wave?

Low-income countries (LIDCs) are typically characterized by intermittent and very modest accessto private external funding sources. Motivated by recent developments in private flows to LIDCsthis paper makes two contributions: First, it constructs a new comprehensive dataset on grossprivate capital flows with special focus on non-FDI flows in LIDCs. Concentrating on LIDCs andmore specifically on gross non-FDI private flows is intentionally aimed at closing a gap inexisting datasets where country coverage of developing economies is limited mainly to emergingmarkets (EMs). Second, using the new data, it identifies several shifting patterns of gross non-FDIprivate inflows to LIDCs. A surprising fact emerges: since the mid 2000's periods of surges ingross non-FDI private inflows in LIDCs are broadly comparable to those of EMs. Moreover,while gross non-FDI inflows to LIDCs are on average much lower than those to EMs, we showthat the LIDC top quartile gross non-FDI inflow is comparable to the EM median inflow andconverging to the EM top quartile inflow.