Sources for financing domestic capital - Is foreign saving a viable option for developing countries?

This paper studies the properties of self-financing ratios - the share of domestic capital that was financed by domestic savings, without relying on external borrowing. On average, 90% of the stock of capital in developing countries is self-financed, and this fraction was stable throughout the 1990s. Greater integration of financial markets throughout the 1990s has not changed the dispersion of self-financing rates. Countries with higher self-financing ratios grew significantly faster than countries with low self-financing ratios. Financial integration may have facilitated diversification of assets and liabilities, but failed to offer new net sources of financing capital in developing countries.