Manual Capital Movements and Economic Development

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Using the pair-wise Granger causality test , he specifically examines causal relationship between foreign capital inflows and economic growth in India. The important observations emerge from pair-wise Granger causality test, which shows there is the long-run equilibrium relationships exist between the following pairs of variables viz. Aurangeb and Haq, investigated the impact of foreign capital inflows on economic growth of Pakistan. The data used in this study were collected from the period of to Unit root test confirms the stationary of all variables at first difference.

The multiple regression analysis technique was used to identify the significance of different factors. Results indicate that the all three independent variables are having positive and significant relationship with economic growth GDP. The Granger-Causality test confirms the bidirectional relationship between remittances and external debt, gross domestic product and external debt, foreign direct investment and external debt, and foreign direct investment and remittances.

On the other side, the study found unidirectional relationship from gross domestic product to foreign direct investment. It is concluded that the foreign capital inflows are very important for the growth of any economy. Obiechina and Ukeje examined the impact of capital flows foreign direct investment , exchange rate, export and trade openness on economic growth of Nigeria as well as the causal long-run relationship among the variables, using time series data from — The unit root test confirmed the series to be stationary at I 1 , while the Johansen Co-integration test suggested the existence of at least one Co-integration vector among the variables.

Using Engle-Granger 2-Step procedure, it was observed that all the variables, except the FDI are statistically significant and influence economic growth in the short-run dynamic equilibrium model. Exogeneity test confirmed that fdi has weak exogeneity with economic growth.

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In addition, the Pairwise Granger causality revealed the existence of uni-directional causality between economic growth and fdi, and uni-directional and bi-directional causality among some of the variables. Odhiambo, studied the dynamic causal relationship between financial deepening and economic growth in Tanzania using a multivariate model.

The study included foreign capital inflows as an intermittent variable between financial deepening and economic growth, thereby creating a simple tri-variate model. Using the newly introduced ARDL-bounds testing procedure, the study finds a distinct unidirectional casual flow from economic growth to financial depth in Tanzania. This applies irrespective of whether the causality is estimated in the short run or in the long-run. Other results show that there is a bi-directional causality between financial development and foreign capital inflows, and a prima-facie unidirectional causality from foreign capital inflows to economic growth.

The study, therefore, concludes that financial development in Tanzania follows growth, irrespective of whether the causality is estimated in a static or dynamic formulation. Three alternative measures of financial sector development — total liquid liabilities, total banking sector credit and credit to the private sector — were employed to capture different ramifications of financial intermediation. The results support the view that the extent of financial sophistication matters for the benefits of foreign direct investment to register on economic growth in Ghana, Gambia and Sierra Leone depending on the financial indicator used.

Nigeria, on the other hand, displays no evidence of any short- or long-run causal flow from FDI to growth with financial deepening accompanying. Olusanya takes a look at the impact of Foreign Direct Investment inflow and economic growth in a pre and post deregulated Nigerian economy, a Granger causality test was use as the estimated technique between — However, the analysis de-aggregates the economy into three period; to , to and to , to test the causality between foreign direct investment inflow FDI and economic growth GDP.

However, between to it shows that is causality relationship between economic growth GDP and foreign direct investment inflow FDI that is economic growth drive foreign direct investment inflow into the country and vice versa. Umoh, Jacob and Chuku, proposed that there is endogeniety i. Single and simultaneous equation systems are employed to examine if there is any sort of feedback relationship between FDI and economic growth in Nigeria.

Fambon capture the impact of foreign capital inflows which include foreign aid and foreign direct investment on economic growth in Cameroon. Ekeocha, Malaolu and Oduh, ascertained the long run determinants of foreign portfolio investment FPI in Nigeria such that appropriate policies will be pursued to attract same in the long run. FPI has grown recently in proportion relative to other types of capital inflows to Nigeria before the wake of global financial crisis.

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Incidentally, there is no empirical regularity regarding the determinants of FPI. This study tries to add to the stock of knowledge by modelling the long-run determinants of FPI in Nigeria over the period of converted into quarterly series. The variables considered are, market capitalization, real exchange rate, real interest rate, real gross domestic product and trade openness.

The study applies time series analysis specifically the finite distributed lag model and discovers that FPI has a positive long-run relationship with market capitalization, and trade openness in Nigeria. Lensink and Morrissey, examined the effect of aid on economy by controlling aid uncertainty for a number of developing aid recipient countries.

The study posits that the impact of aid on growth depends fundamentally on the effect of aid on the level and efficacy of investment. The study showed that aid uncertainty is consistently and significantly have negative effect on growth and that controlling for uncertainty has a negative robust effect on growth via the level of investment. Karras, examined the relationship between foreign aid and growth in per capita GDP for the period for a sample of 71 aid-receiving developing countries. The study showed that the effect of foreign aid on economic growth is positive, permanent, significant and sizable, while Chatterjee and Turnosky investigated the link between foreign aid and economic growth and welfare in a small open economy.

The study further stressed that endogeneity of the labour-leisure choice and the adjustment of the real wage rate plays a crucial role in the propagation of foreign aid shocks and that another crucial determinant of the efficacy of foreign aid is externalities associated with the public good that aid helps public finance. The study showed further that transitional adjustment to a foreign aid shock is dependent crucially on the elasticity of substitution in production and the relative importance of the labor-leisure choice utility.

He found that external debt has negative relationship with economic growth in Nigeria.

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  6. For example, a one per cent increase in external debt resulted in a decrease of 0. These relationships were both found to be significant at the ten per cent level. In addition, the pairwise Granger Causality test revealed that uni-directional causality exists between external debt service payment and economic growth at the 10 percent level of significance. In addition, external debt was found to granger cause external debt service payment at the 1 percent level of significance, while statistical interdependence was however found between external debt and economic growth.

    This session explores the techniques and procedures applied in the collection of data and tools for statistical analysis. The set of time series data used in this study were collected from secondary sources. The data were obtained from World Bank databank economic indicators. Meanwhile the data for foreign direct and foreign portfolio investment were summed together as one variable. In this study, we employed the Ordinary Least Square method to develop a model on the relationship between capital inflows and economic growth of the developing economies selected.

    The functional and parametric models is as stated below:.

    Capital Movements and Economic Development

    In other to actualize the aforementioned hypothetical assumptions, we employed the following models and tests to this effect. Regression analysis as stated above was used to specify the model. The time series properties of the variables were examined using Augmented Dickey Fuller, ADF unit root test, the long-run relationship among the variables was tested using the Johansen co-integration test, while the Granger causality test was applied to establish if there is a causal relationship between variables.

    Human Capital and the Future of Economic Growth and Security

    It had been shown in econometric studies that most macroeconomic time series are not stationary at levels Engle and Granger, This implies that most ordinary least squares OLS regressions that are carried out at levels may not be reliable. Giving this knowledge, testing for stationarity of variables to obtain a more reliable result becomes very essential.

    Augmented Dickey-Fuller unit root ADF test was used to examine the properties of the time series data. When a linear combination of variables that are I 1 produces a stationary series, then the variables may be co-integrated. This means that a long-run relationship may exist among them, which connotes that they may wander from one another in the short-run but in the long run they will move together Pesaran and Smith This is an indication that the variables are not co-integrated in the long run, necessitating the acceptance of the null hypothesis of no co-integration.

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    The Granger Causality approach to the problem of whether x causes y is to see how much of the current y can be explained by past values of x and then to see whether adding lagged values of x can improve the explanation. According to Table 3, there are no bi—directional causal relationships among the variables. Four explanatory variables were regressed against the dependent variable — Real Gross Domestic Product, the model is as stated below:.

    The result of the regression revealed one million Dollar increase in Real Gross Domestic Product will attract 4. Furthermore, F-statistic value of In addition, R-square adjusted of 0. The F-statistic and R-square adjusted figures signify that the model is robust, of goodness fit and reliable in making informed decisions. The evaluation of the coefficients of the explanatory variables revealed the existence of positive relationship in foreign direct and portfolio investment, workers remittances and foreign borrowing with economic growth as depicted in Table 4 and equation 4.

    The study further revealed that 0.

    An Economic Analysis of International Capital Flow

    These results infer that the three parameters are significantly related to economic growth in Nigeria. However, there is negative and no significant relationship between foreign aids and economic growth as indicated by its probability value of 0. Therefore, we accept the Hypothesis of no significant relation between foreign aids and economic growth in Nigeria. Therefore, the families of emigrants can work less than they would have to in the absence of the money transferred by the Diaspora.

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    At the macro level, the inflow of remittances can contribute to the "rise of foreign currency reserves, which can generate appreciation of the domestic currency, which in turn affects the profitability of exports of manufactured goods" Oliveira Vidal, , p. Empirical studies on the economic effects of remittances show contradictory results. At the macro level, research indicates that there is no evidence that remittances received by a country positively affect the rate of economic growth.

    This was the case of the study conducted by Nicola Spatafora , who analyzed developing countries in the period This study demonstrated that there is no statistically significant relationship between the amount of remittances and spending on education or health, or between remittances and investments. The author concluded that the impact of remittances on development is of a complex and indirect nature, and therefore very difficult to be shown in macroeconomic studies Spatafora, The authors analyzed the relationship between remittances and economic growth, including the effectiveness of the financial sector in the countries of origin of immigrants.