The Impact of Capital Inflow to Economic Performance (original) (raw)
Related papers
The Impact Of Capital And Remittance Flows On Economic Performance In Mena Countries
Economic Research Forum Working Papers, 2008
Using data for a sample of developing countries, we analyze the effects of external flows, namely migrants' remittances and FDI flows, on real output growth, price inflation, and components of aggregate demand. The historical evidence indicates unstable patterns of FDI inflows to a sample of nine MENA countries. In contrast, remittances flows appear to be more stable over time in recipient countries. Except in Jordan, real GDP growth does not vary significantly with FDI inflows. Tunisia provides the only significant evidence of an increase in price inflation in response to FDI, which is coupled with a significant increase in private investment. FDI flows stimulate a higher increase in imports in Egypt. Remittances inflows appear, in general, a more important determinant of macroeconomic performance. Remittances inflows stimulate real output growth in Jordan and decrease price inflation in Egypt and Tunisia. The increase in growth in Jordan is coupled with an increase in private consumption, private investment, real exports and imports with respect to remittances inflows. Moreover, remittances increase export growth in Tunisia 6 * The results reject the null hypothesis of non-stationarity at the 10% level. + The numbers in parentheses represent the lag lengths. The lag length is selected based on Schwartz Information Criteria (SCI) out of max lag of 12)
Inflow Remittances And Economic Growth : An Empirical Study Of Jordan
Jordan Journal of Economic Sciences, 2017
ABSTRACT The objective of this paper is to investigate the effects of remittances inflow on real GDP growth in Jordan during the period 1976-2013. Data from World Bank and Central Bank of Jordan spanning the period of the study is used. Vector Error Correction Model (VECM) is employed in the analysis. The main findings are follows, analysis reveals a positive long-run (or equilibrium) relationship between economic growth, and each of capital, labor, and remittances in Jordan. In the short run, capital accumulation and labor compensations show no statistical significant association with real GDP growth, whereas remittances show negative impact on GDP growth. The error correction term that measures the speed of adjustment toward equilibrium is found negative in sign and statistically significant, where GDP growth corrects the short-run disequilibrium by 2.6% a year. Keywords: Remittances, Real GDP growth, VECM, Jordan
The Positive and Negative Impact of Remittances on Economic Growth in MENA Countries
2012
In the worldwide economy, remittances represent one of the major international flows of financial resources. Sometimes the flows of remittances can exceed the flows of foreign direct investment (FDI). For centuries, economists have tried to recognize why some countries reflect strong economic growth, while others stand still at low levels of output. This effort led to a numerous of possible determinants of economic growth including financial development. This study aims to observe the impacts of remittances on economic growth, using panel data set of MENA countries, Algeria, Egypt, Jordan, Libya, Morocco, Oman, Syria, Lebanon and Tunisia, during the period 2000-1010. These countries have experienced a major increase in remittance inflows, and at this time accounts for the bulk of total remittance receipts, compared with other regions. Most countries, remittances represent the largest source of foreign exchange earnings and represent more than 10 per cent of GDP. Hence, it is worth n...
Remittances and Economic Growth Nexus : Evidence from Jordan
2018
Remittances considered as one of the most important sources of financial inflows for developing countries. This study aims at investigating whether remittances have a significant role in promoting economic growth in Jordan or not. For this purpose the study tests the unit root for the variables and applies the cointegration test besides the error correction model using annual data for the period 1972 to 2016. Results reveal that there is a stable long run relationship between GDP percapita and remittances in Jordan as well as in the short run. As a result, the study confirms the positive significant effect of remittances on economic growth. In other words, remittances of Jordanians enhancing economic growth for local Jordanians which improve standards of living and participate in reducing level and depth of poverty in Jordan. The study recommends cutting fees on remittances transfers and to direct Jordanians to invest remittances in productive projects in order to achieve high econo...
Global Economics Review
To meet the developmental goals and fulfill the domestic labor demand of Saudi Arabia, more than 9.5 million skilled, semi-skilled and highly skilled workers from across the world are imported. After the United States of America (USA), it is the second-largest which is responsible for the larger outflow of remittances. This study is an empirical investigation to explore the impact of remittances outflow on the economic growth activity of Saudi Arabia. Furthermore, it also tests whether this outflow causes inflation in the Saudi economy. For the sack of empirical investigation, this study utilized annual time series data ranging from 1970 to 2017. Before estimating the shortrun and long-run estimates by the application of the AutoRegressive Distributed Lag (ARDL) method, time-series properties of data are explored using the Augmented Dicky Fuller (ADF) test.
The Impact of Migrant Remittances on Economic Growth in Arab Countries
Journal of Economics and Public Finance, 2019
The potential role that workers' remittances are likely to play in promoting economic growth, especially in Arab countries, is currently attracting considerable attention. These remittances have an impact on the remitting economies as well. The Gulf region is considered one of the top sending countries of migrant remittances. In this study, empirical analysis is carried out with panel techniques using data over the last three decades for six Arab countries. Our results show that migrant remittances have a positive and significant impact on economic growth. This relationship is also significant when we use dynamic panel data. An indirect effect of remittances on economic growth is pointed out especially via the investment and the household final consumption expenditure channels. Policymakers in Arab countries should take appropriate policy actions to increase the outflow of workers. Developed capital markets, as well as a sound macroeconomic policy environment, would provide incentives for sustainable remittances transfers.
The effects of remittances outflows on economic growth in Saudi Arabia: Empirical evidence
Journal of Economics and International Finance
Within the last decade, the Kingdom of Saudi Arabia (KSA) achieved a high economic rate of growth of about 5.5% per year. Consequently, the number of immigrants grew rapidly reaching 9 million, which resulted in an increase in worker remittances out of the Kingdom. Since then, the KSA has become one of the first countries of the world in terms of remittances outflows and coming third worldwide after the USA and Russia in 2014 as remittances totaled 37 billion dollars, about 5% of the gross domestic product (GDP) and have doubled within 6 years. This research tries to measure the effects of these remittances on the economic growth of Saudi Arabia during the period 1970 to 2014 by using standard growth model augmented by the amount of remittances outflows. The Autoregressive Distributed Lag approach to Error correction modeling (ARDL-ECM) was used in order to estimate a short and long relation between remittances and gross domestic product (GDP) in Saudi Arabia in the studied period. The main result is that, both in the long and the short term, remittances outflows have no significant effect on GDP. This could be attributed to their decreasing share relative to GDP.
Research Journal of Finance and Accounting, 2014
Remittance inflow into Sub-Saharan Africa region has increased substantially, even above other foreign capital flows like Foreign Direct Investment (FDI) and other Development Assistance (ODA). Empirical evidence on the impact of remittances on output growth in the region is rather scarce. Few studies on this topic produced mixed results probably due to their inability to identify the channels through which remittances might affect economic growth. This study then investigates the impact of remittances on output growth in sub Saharan Africa, looking specifically the financial development and investment channels. Panel data estimation techniques were adopted in the analysis, followed by the stability tests. The findings from the study indicate that remittance spur growth in the Sub-Saharan African region and that financial development and investment played pivotal role in the remittance output growth nexus. Keywords: Remittances, economic growth, financial development, foreign direct investment, panel data analyses. investment (FDI) and twice the amount of official aid received, both in absolute terms and as a proportion of GDP (Aggarwal, Demirgue-Kunt and Martinez, 2009). Sub-Saharan Africa region is estimated to have received about $31 bn, representing about 1 percent of GDP. According to World Bank (2012), if remittances sent through informal channels are included in official transfers, total remittances could be as much as 40 percent higher than the official records. Sub-Saharan African migrants prefer sending money through unofficial channels probably due high transfer cost charged by local banks. Despite these huge resource inflow, Foreign Direct Investment (FDI) and official Development Assistance ODA have received much more research attention from both academicians and policy makers alike. The reason for this oversight is due to some belief by most researchers that remittances is a consumption income and do not influence investment patterns. According to the World Bank send money data base, Sub-Saharan Africa region is the most expensive region to send money to, with average remittance costs reaching 12.4 percent in 2012. The average cost of sending money to Africa is almost 12 percent higher than global average of 8.95 percent and almost double the cost of sending money to south Asia. Sub-Saharan African countries popularity in higher transaction costs remittance business is due to apparent lack of financial development infrastructure to intermediate these huge resource inflows Mohapatra and Ratha (2011). However, there have been several financial market reforms in most Sub-Saharan Africa economies in order to deepen the financial market, but whether these financial reforms have contributed to economic growth especially through remittances and investment is a question that requires an investigative answer. From economic growth point of view, sources of economic growth in SSA have been the subject of an old debate in macroeconomic literature. While researchers like Solow 1956; Schultz 1980; Romer 1986, and Levine 1986 concentrated their research effort in search of economic growth variables on physical capital accumulation, Foreign Direct Investment, openness, investment and Finance respectively relatively little attention has been accorded to remittances flows as potential source of economic growth especially in SSA. Another contentious issue in macroeconomic literature in SSA economies is low output growth that is caused by paucity of investible funds to establish micro businesses.
International Journal of Academic Research in Economics and Management Sciences
This article investigates the impact of remittances on economic growth, investment and domestic savings in selected MENA labor exporting countries. The estimations have been done in the presence of other international capital inflow, which are foreign aid and foreign direct investment. A multiple equations model estimated simultaneously using different techniques. We found a positive impact of remittances on both growth and investment, meanwhile a negative impact on domestic savings. Aid impacts negatively on both growth and savings where it finance consumption instead of investment and enhance rent seeking behavior. Government expenditure and FDI are important source of growth. We recommended that policies for encouraging final use of productive investment of remittances. In addition, enhancing more project of migrant in home country that may facilitate their trade with host countries. Finally, more efficient allocation of aid is requires, and attracting more FDI.
Remittances and Economic Growth in a Small and Volatile Economy
International Journal of Business and Economics Research, 2019
This paper investigates the relationship between worker remittances and economic growth in a small country with volatile macroeconomic conditions (namely, Jordan). Previous research determines three main channels through which the impact of remittances can be transmitted: labor supply, capital accumulation and investment, and productivity. A historical behavior of these variables since 1976 to 2016 is analyzed and discussed in the context of the Jordanian economic structure. The Autoregressive Distributed Lag (ARDL) model that allows economic growth (measured by growth in per capita GDP) and financial development (measured by bank credit) to be affected by their lagged values and by current and lagged values of remittances (measured by remittances as percentage of GDP) is used to test for equilibrating and long-term associations between remittances and economic growth and financial development indicators. The results show that although Jordanian worker remittances represent a vital source of financial flows, they are not used to smooth consumption by receiving households and have no impact on economic growth or financial development. Instead, they lead to increase in imports and trade deficit. Thus, if reverse migration of Jordanian workers takes place, it will lead to sudden increase in skilled labor supply, which will exacerbate Jordan's unemployment problems.