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Nexus between Capital Flows and Economic Growth: An Evidence from South Asian Countries

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  • Muhammad Aslam
  • Wajid Alim
  • Naeem Khan

Abstract

This study aims to look at how capital inflows affect economic growth in South Asian countries. Gross Domestic Savings (GDS), Foreign Direct Investment (FDI), Foreign Portfolio Equity Investment (FPEI), Foreign Debts (F.Debts), and Foreign Aids (F.Aids) are the study's independent variables, while Gross Domestic Product Growth (GDPG) is the dependent variable. Data has been collected from World development Indicator and Quandl from 1980 to 2018. To analyse the data Panel ARDL (PMG) model was utilised. Gross domestic savings, foreign direct investment, and foreign aid, all exhibit positive and strong long-term connections with GDP growth. Results also revealed that there are negative and strong long-run links between GDP, Foreign Portfolio Equity Investment, and Foreign Aids. There are negative and insignificant links between GDP growth, Foreign Direct Investment, and Foreign Aids. Results also reveal the positive and insignificant connections between GDP and GDS, FPEI, and foreign debt. The data imply that institutional improvement has an impact on capital inflows and economic growth. The study has policy implications for government and policymakers in the sense that capital flows and economic growth can improve the institutional environment.

Suggested Citation

  • Muhammad Aslam & Wajid Alim & Naeem Khan, 2022. "Nexus between Capital Flows and Economic Growth: An Evidence from South Asian Countries," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 14-21.
    • Handle: RePEc:adx:journl:v:4:y:2022:i:2:p:14-21
    DOI: 10.52223/jei4022202
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