(FORTUNE Magazine) – One of the more fashionable explanations for the current high altitude of global interest rates is the supposed global capital shortage. Developing nations are building their economies like mad, the theory goes, and their thirst for funds is draining the planet's supply of capital, pushing up interest rates around the world. It's a plausible hypothesis, but not everyone buys it. Interest rates are up, says Edward Yardeni, chief economist at C.J. Lawrence, because of an international fear of inflation, "not because there's a boatload of prospectuses coming in from China for all sorts of bond deals." Such deals have in fact been arriving for some time, what with big infrastructure ventures popping up all over Asia and Latin America, like the telecom project in Bangkok pictured above. But Yardeni says the amount of funds flowing into emerging markets isn't enough to cause a capital shortage. Demand for capital actually appears to be slackening. According to data compiled by Merrill Lynch, capital demand from developing nations declined to $59 billion in the second quarter of this year, from a furious $98 billion in the final quarter of 1993. Much of whatever capital is needed will come from the developing economies themselves. After all, some of the countries doing the investing are big savers too. Morgan Stanley chief strategist Barton Biggs thinks the rise of pension and mutual funds in Latin America and Asia will provide a rich pool of domestic savings for local nation-builders to draw upon.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: MERRILL LYNCH CAPTION: Capital raised by developing countries