Access to foreign capital may also exacerbate domestic financial distortions, such  2  See Layton and Makin (1993), Makin, Zhang, and Scobie (2008), and Dow (1984) for some evidence on the importance of foreign investment in Australia, Canada, and New Zealand.
3  Bordo, Eichengreen, and Irwin (1999) note that in the 19th century most foreign investment in the United States and in other countries was directed to certain sectors of the economy, including railways, resource extraction, public utilities, and government.