Financial flows and per capita income in developing countries

Sajid Anwar; Arusha Cooray

doi:10.1016/j.iref.2014.10.009

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Financial flows and per capita income in developing countries

Journal article

Open access

Peer reviewed

Financial flows and per capita income in developing countries

Sajid Anwar and Arusha Cooray

International Review of Economics and Finance, Vol.35, pp.304-314

2015

DOI: https://doi.org/10.1016/j.iref.2014.10.009

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Abstract

FDI

remittances

official development aid

developing countries

panel data analysis

Using country level panel data over the period 1970-2011, this paper evaluates the direct as well as indirect impact of three types of financial flows (foreign direct investment, remittances and official development aid) on the per capita income of a group of low and middle income countries. The empirical results suggest that the direct effect of official development aid in developing countries is mostly negative. This conclusion also holds when the sample is divided into different regions. All three estimation techniques used (i.e., Ordinary Least Squares, panel fixed effects and system Generalised Method of Moments) yield broadly similar results. We find that official development aid and government spending are complementary and hence, depending on the level of effectiveness of government spending programs, official development aid can have an indirect positive impact on income per capita. On the other hand, both remittances and foreign direct investment appear to have a direct positive and statistically significant effect on per capita income.

Details

Title: Financial flows and per capita income in developing countries
Authors: Sajid Anwar (Author) - University of the Sunshine Coast - Faculty of Arts and Business
Arusha Cooray (Author) - University of Nottingham, Malaysia
Publication details: International Review of Economics and Finance, Vol.35, pp.304-314
Publisher: Elsevier BV
Date published: 2015
DOI: 10.1016/j.iref.2014.10.009
ISSN: 1059-0560
Copyright note: Copyright © 2015. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Organisation Unit: School of Business and Creative Industries; Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99448623102621
Output Type: Journal article

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