the tax structure or by other regulations) in a market and the extent of foreign ownership allowed may also have an effect on the allocation of investment in the real sector. For example, in markets in which bonds are readily available or pension funds are impotent buyers, more capital is likely to be available for long- gestating projects. Two conclusions emerge from this analysis. First, capital flows are inherently neither good nor bad. They have a great potential to be either, depending on how productively they are used or on whether they are allowed to distort economic incentives and de