Large and foreign-owned institutions may have difficulty extending relationship loans to informationally opaque small firms. Bank distress does not appear to affect small business lending, although even small firms may react to bank distress by borrowing from multiple banks

In the 1990s, foreign direct investment began to swamp all other cross-border capital flows into developing countries. Does foreign direct investment support sound development? In particular, does it contribute to poverty reduction?

Private portfolio flows to a country tend to rise in response to an increase in the current account deficit, a rise in foreign direct investment flows, higher per capita income, and growth performance. The most important determinant of official lending to a developing country seems to be the...