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Disaggregated Capital Flows and Developing Countries’ Competitiveness

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  • Ben Naceur, Sami
  • Bakardzhieva, Damyana
  • Kamar, Bassem

Abstract

Attracting capital and foreign exchange flows is crucial for developing countries. Yet, these flows could lead to real exchange rate appreciation and may thus have detrimental effects on competitiveness, jeopardizing exports and growth. We investigate this dilemma by comparing the impact of six types of flows on real exchange rate behavior in a sample of 57 developing countries covering Africa, Europe, Asia, Latin America, and the Middle East. The results reveal that portfolio investments, foreign borrowing, aid, and income lead to real exchange rate appreciation, while remittances have disparate effects across regions. Foreign direct investments have no effect on the real exchange rate, contributing to resolve the above dilemma.

Suggested Citation

  • Ben Naceur, Sami & Bakardzhieva, Damyana & Kamar, Bassem, 2012. "Disaggregated Capital Flows and Developing Countries’ Competitiveness," World Development, Elsevier, vol. 40(2), pages 223-237.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:2:p:223-237
    DOI: 10.1016/j.worlddev.2011.07.001
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    Cited by:

    1. Sekkat, Khalid, 2016. "Exchange rate misalignment and export diversification in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 1-14.
    2. repec:cii:cepiei:2015-q1-141-8 is not listed on IDEAS
    3. Thomas Goda & Alejandro Torres, 2013. "Tasa de cambio real y recomposición sectorial en Colombia," DOCUMENTOS DE TRABAJO CIEF 010936, UNIVERSIDAD EAFIT.
    4. Jean-Louis COMBES & Patrick PLANE & Tidiane KINDA & Rasmané OUEDRAOGO, 2017. "Does It Pour When it Rains? Capital Flows and Economic Growth in Developing Countries," Working Papers P157, FERDI.
    5. Nusrate Aziz & Arusha Cooray & Wing Leong Teo, 2017. "Do immigrants’ funds affect the exchange rate?," Discussion Papers 2017-13, University of Nottingham, GEP.
    6. Khalid Sekkat, 2012. "Exchange Rate Undervaluation, Financial Development and Growth," Working Papers 742, Economic Research Forum, revised Dec 2012.
    7. Thomas Goda & Alejandro Torres García, 2015. "Flujos de capital, recursos naturales y enfermedad holandesa: el caso colombiano," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 33(78), pages 197-206, Diciembre.
    8. Christos Nikas & Student Anastasia Blouchoutzi, 2014. "Emigrants’ Remittances and the “Dutch Disease” in Small Transition Economies: the Case Of Albania and Moldova," Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 45-65, March.
    9. Marinela GEAMĂNU, 2015. "Analysis of the evolution of foreign direct investment in the European Union, amid the global economic crisis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(603), S), pages 223-236, Summer.
    10. Al-Abri, Almukhtar & Baghestani, Hamid, 2015. "Foreign investment and real exchange rate volatility in emerging Asian countries," Journal of Asian Economics, Elsevier, vol. 37(C), pages 34-47.
    11. Thomas Goda & Alejandro Torres, 2013. "Overvaluation of the real exchange rate and the Dutch Disease: the Colombian case," DOCUMENTOS DE TRABAJO CIEF 010930, UNIVERSIDAD EAFIT.

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