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The Impact Of Capital and Remittance Flows on Economic Performance in MENA Countries

Listed author(s):
  • Magda Kandil

    ()

    (International Monetary Fund, The Western Hemisphere Department, Washington D.C.)

  • Ida A. Mirzaie

    ()

    (Ohio State University , Department of Economics)

Using data for a sample of developing countries, we analyze the effects of external flows, namely migrants’ remittances and FDI flows, on real output growth, price inflation, and components of aggregate demand. The historical evidence indicates unstable patterns of FDI inflows to a sample of nine MENA countries. In contrast, remittances flows appear to be more stable over time in recipient countries. Except in Jordan, real GDP growth does not vary significantly with FDI inflows. Tunisia provides the only significant evidence of an increase in price inflation in response to FDI, which is coupled with a significant increase in private investment. FDI flows stimulate a higher increase in imports in Egypt. Remittances inflows appear, in general, a more important determinant of macroeconomic performance. Remittances inflows stimulate real output growth in Jordan and decrease price inflation in Egypt and Tunisia. The increase in growth in Jordan is coupled with an increase in private consumption, private investment, real exports and imports with respect to remittances inflows. Moreover, remittances increase export growth in Tunisia.

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Paper provided by Economic Research Forum in its series Working Papers with number 440.

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Length: 34
Date of creation: 09 Jan 2008
Date of revision: 09 Jan 2008
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:440
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  1. Engle, Robert F., 1982. "A general approach to lagrange multiplier model diagnostics," Journal of Econometrics, Elsevier, vol. 20(1), pages 83-104, October.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
  3. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
  4. Kandil, Magda & Mirzaie, Aghdas, 2002. "Exchange rate fluctuations and disaggregated economic activity in the US: theory and evidence," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 1-31, February.
  5. Kandil, Magda & Mirazaie, Ida, 2004. "The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries," Journal of Developing Areas, Tennessee State University, College of Business, vol. 38(2), pages 189-219, January-M.
  6. Michael T. Gapen & Thomas F. Cosimano & Ralph Chami, 2006. "Beware of Emigrants Bearing Gifts; Optimal Fiscal and Monetary Policy in the Presence of Remittances," IMF Working Papers 06/61, International Monetary Fund.
  7. Kandil, Magda & Mirzaie, Ida Aghdas, 2003. "The effects of dollar appreciation on sectoral labor market adjustments: Theory and evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 89-117.
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