This paper develops a theoretical and empirical analysis on the pattern of long-term capital flows. With a sample of 105 countries and data for the period 1980-2004, the econometric methodology includes models for cross-sectional and panel data. The results presented suggest: i) inconsistency between the predictions of the neoclassical model and the observed pattern of capital flows, which characterizes the puzzle; ii) under the conventional approach, the explanations for the puzzle are differences in fundamentals between countries and imperfections in financial markets; iii) there is no evidence that differences between countries regarding the institutional environment, human capital stock, financial integration, macroeconomic policy and financial development explain the puzzle. Considering the results presented, it outlines an alternative explanation of heterodox inspiration for the pattern of capital flows.
Financial integration; Capital flows; Lucas Puzzle
