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"FOREIGN CAPITAL"
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MISALLOCATION AND CAPITAL MARKET INTEGRATION
We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity for affected industries in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in firms’ input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. Liberalization increases capital overall. For domestic firms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 23%, physical capital by 53%, wage bills by 28%, and reduces MRPK by 33% relative to low MRPK firms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that inefficiencies in that sector may cause misallocation. Finally, we propose an assumption under which a novel method exploiting natural experiments can be used to bound the effect of changes in misallocation on treated industries’aggregate productivity. These industries’ Solow residual increases by 3–16 %.
Journal Article
Endogenous specification of foreign capital inflows, human capital development and economic growth
PurposeThe purpose of this paper is to empirically investigate the relationship between foreign capital inflows, human capital development (HCD) and economic growth in ECOWAS countries.Design/methodology/approachIn line with the augmented Solow model, the relationship between foreign capital inflows, human capital development and gross domestic product in the ECOWAS member countries is investigated using the pool mean group method.FindingsThe authors find overwhelming evidence that foreign capital inflows and human development have a significant effect on economic growth in ECOWAS member countries. However, foreign direct investment (FDI), official development assistant, HCD and gross domestic investment are positively related to economic growth in sub-regions economies. Conversely, migrate official remittance, portfolio investments and external debts are negatively related to economic growth.Research limitations/implicationsThe authors recommend that sound economic policies should be targeted in encouraging foreign capital accumulation and HCD, especially on FDI, official development assistance that exerts a positive impact on the economic growth of the sub-region. Therefore, training is required to prepare the labor force to work with new technologies and promote efficient enterprise for ECOWAS economies to compete with developed countries and emerging economies.Social implicationsThis study argued that the development of human capital is a pathway that may lead countries away from sustained growth. In the context of any economy which lack well-developed capital and education markets, many otherwise qualified citizens may be denied the basic skills they need in order to contribute fully to the nation’s economic development. HCD would encourage foreign investments, resulting in reduction in poverty in ECOWAS countries.Originality/valueSeveral studies have been done on foreign capital inflow and economic growth nexus such as Orji et al. (2014), Ajide and Raheem (2016), Musibau et al. (2017), etc.; however, none of the research studies has actually examined the effect of the relationship between foreign capital inflows and HCD on economic growth in ECOWAS countries. This study is designed to fill the vacuum.
Journal Article
The Impact of Foreign Capital Inflows on Economic Growth in Bangladesh
Le Bangladesh a reçu un énorme afflux de capitaux étrangers (FCI) depuis son indépendance. Cette étude utilise le modèle de со-intégration ARDL (Autoregressive Distributed Lag) pour les séries chronologiques 1976-2019 afin d'étudier les impacts des FCI et de leurs composantes (investissement direct étranger, aide étrangère et revenus des transferts de fonds) sur la croissance économique du Bangladesh. Les résultats estimés suggèrent que l'investissement direct étranger et ses composantes favorisent généralement la croissance économique à long terme, mais que leurs impacts à court terme sur la croissance économique sont généralement négatifs. L'étude montre également que la formation brute de capital favorise la croissance économique à la fois à court et à long terme, que l'ouverture commerciale et la croissance démographique ont des effets mitigés et que l'instabilité naturelle et politique ralentit la croissance économique à la fois à court et à long terme. Ces résultats fournissent des indications précieuses aux décideurs politiques concernant les effets à long terme et à court terme des FCI sur la trajectoire de la croissance économique au Bangladesh.
Journal Article
Foreign capital flow, institutional quality and human capital development in sub-Saharan Africa
This study investigates the moderating effect of institutional quality on the relationship between foreign capital flow and human capital development in sub-Saharan Africa. The study uses a sample of 34 countries in sub-Saharan Africa and data for 2009 to 2019. Human capital development is measured using the Human Development Index (HDI). To control for endogeneity, the study uses the system generalized method of moments (GMM) estimator. The results demonstrate a positive relationship between remittances, foreign direct investment (FDI), institutional quality and human capital development. Official development assistance (ODA), on the other hand, has a negative and significant effect on human capital development. The findings further reveal that the effect of remittances and FDI on the human capital development is moderated by the institution's quality. However, the effect of ODA on the development of human capital is not influenced by institutional quality. Findings from the study provide valuable insights to policymakers. This study highlights the importance of remittances and FDI in stimulating human capital development in sub-Saharan Africa. Additionally, the study reveals the harmful impact of official development on human capital development that necessitates policy interventions. Drawing on these findings, policymakers should undertake policy reforms to improve the quality of institutions and enhance the impact of foreign capital flows on human development. This study offers two contributions. First, the study fills a vacuum in the literature by focusing on the relationship between foreign capital flow, institutional quality, and the development of human capital in sub-Saharan Africa. Second, the SSA is one of the developing nations that has seen a significant brain drain because of widespread migration to industrialized nations. Therefore, it is necessary to investigate how much foreign capital flows through the development of human capital contribute to the socio-economic change of the region.
Journal Article
Foreign capital flows and economic development in Africa : the impact of BRICS versus OECD
This collection examines the extent to which foreign capital from conventional (OECD countries) and non-conventional (BRICS) sources has impacted economic development in Africa over the last two decades. It provides in-depth analyses of the nature, motives, and implications of this capital, and identifies drivers of contemporary rapid growth within and across African countries. Authored by leading experts, the book offers original insights for academics, policymakers, and practitioners studying the changes taking place in Africa as the continent strides more confidently toward integration with the global economy. The major themes addressed in this book include:* The implications of growing Chinese engagement in Africa * BRICS countries' versus OECD countries' investment contributions to Africa* The politics of land, land grab, and the puzzle of inclusive development in Africa* Foreign research and development spillovers, trade linkages, and productivity in Africa* Foreign aid effects on social sector, growth, and structural change in Africa* Remittances, foreign debt, resource management, and economic development in Africa.
Book
Impact of interest rate differential, exchange rate changes and political stability on Foreign capital inflow in Nigeria: Discrete threshold regression model
Lack of investable capital has slowed down the development process in many developing nations, including Nigeria, and this has sparked empirical research on the factors affecting foreign capital flow. Therefore, the purpose of this study was to investigate the effects of interest rate differential, exchange rate changes, and political stability on the entrance of foreign capital into Nigeria between 1981 and 2021. To investigate the impact of the factors on foreign capital inflow in regimes with low and high interest rate differentials, the study used a discrete threshold regression model (DTRM). The study discovered an interest rate differential threshold value of 3.68 percent, indicating that an interest rate differential high and over the predefined threshold promotes a favorable and considerable inflow of foreign capital into the nation. Additionally, the country's capital inflow is influenced by political stability and exchange rate fluctuations. The implication is that investors evaluate a country's IRD in relation to other risk factors (political and macroeconomic) and will only invest if the IRD is higher than3.68 percent since it will balance out other opportunity costs at home and risk factors in the receiving country's economy.
Journal Article