Department of Economics, UCSC

manufacturing industries, 99 countries, 1991-2007, extending Rajan-Zingales (1998). We utilize externalfinance dependence measures in a series of cross-sectional regressions of manufacturing industries’growth rates covering 17 years. Net portfolio debt inflows are negatively associated with growth duringthe mid 1990s. The magnitudes of the negative effect of surges in portfolio debt inflows on growth aresubstantial in the late 1990s for a number of countries. The effect of debt inflows on growth in the 2000sis rather muted. Surges in portfolio equity inflows also exhibit a negative association with aggregategrowth in the manufacturing sector. For instance, the inflow surge during the financial liberalizationperiod, 1993-1994, is associated with a sharp decline in aggregate manufacturing sector growth, but a risein the growth of relatively more financially constrained industries. Equity inflows exhibited economicallysignificant positive impact on the growth of financially constrained industries, unlike their negativeimpact on the average manufacturing growth rate. FDI inflows exhibit a positive association withaggregate manufacturing growth during most of the sample period, both at the aggregate level andspecifically for the industries in need of external financing.