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Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in Developing Countries: A Dynamic Heterogeneous Panel Analysis

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  • Delwar Hossain

Abstract

type="main" xml:id="ecor12114-abs-0001"> The study examines the role of foreign capital and remittance inflows in the domestic savings of 63 developing countries for 1971–2010, paying attention to likely differential effects of FDI, portfolio investment, foreign aid and remittances. The conventional homogeneous panel estimates suggest that foreign aid and remittance flows have a significant negative impact on domestic savings. However, these techniques ignore cross-section dependence and parameter heterogeneity properties and hence yield biased and inconsistent estimates. When we allow for parameter heterogeneity and cross-sectional dependence by employing Pesaran's ([Pesaran, M.H., 2006]) Common Correlated Effects Mean Group estimator technique, only remittances crowd out savings.

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  • Delwar Hossain, 2014. "Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in Developing Countries: A Dynamic Heterogeneous Panel Analysis," The Economic Record, The Economic Society of Australia, vol. 90, pages 102-126, June.
    • Handle: RePEc:bla:ecorec:v:90:y:2014:i::p:102-126
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    File URL: http://hdl.handle.net/10.1111/ecor.2014.90.issue-s1
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    Cited by:

    1. Nnyanzi John Bosco & Oryema John Bosco & Kilimani Nicholas, 2022. "How important are remittances to savings? Evidence from the Latin America and the Caribbean Countries," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 13(1), pages 1-37, January.
    2. Coon Michael & Neumann Rebecca, 2017. "Follow the Money: Remittance Responses to FDI Inflows," Journal of Globalization and Development, De Gruyter, vol. 8(2), pages 1-20, December.
    3. Destrée, Nicolas & Gente, Karine & Nourry, Carine, 2021. "Migration, remittances and accumulation of human capital with endogenous debt constraints," Mathematical Social Sciences, Elsevier, vol. 112(C), pages 38-60.
    4. Jeffrey A. EDWARDS & Cephas B. NAANWAAB & Alfredo A. ROMERO, 2017. "Effect of FDI on real per capita GDP Growth: A Rolling Window Panel Analysis of 60 countries, 1982-2011," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 19-36.
    5. Gloria Clarissa O. Dzeha, 2016. "The decipher, theory or empirics: a review of remittance studies," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 113-134.

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