ABSTRACT
International capital flows between core countries and semi-peripheral and peripheral nations during the nineteenth and twentieth centuries have assumed several distinct forms. Loan transactions were arranged by private business people, brokers and merchant bankers who served as financial intermediaries. The conditions of foreign bonds were laid down in the loan contract and were announced to the potential investors through the loan prospectus. The first international organizations established after World War I, like the Bank for International Settlements or the League of Nations, played only a minor role in the international financial system. During the first boom period, international capital flows were concentrated in the European periphery and Latin America. Partly connected with the expansion of the American cotton economy, US states and municipalities became the principal borrowers in the international capital markets during the 1830s. The impact of external debt on economic growth of borrowing countries during the postwar period has been investigated by several empirical studies using cross-national research designs.
