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

Delwar Hossain

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: 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 remittance. 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 thus yield biased and inconsistent estimates. When we allow for parameter heterogeneity and cross sectional dependence by employing the Pesaran's (2006) Common Correlated Effects Mean Group estimator technique, only remittances crowd-out savings.

Keywords: Domestic savings; Foreign capital inflows; Foreign Aid. Models with panel data (search for similar items in EconPapers)
JEL-codes: C23 E21 E22 F21 F35 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2014
New Economics Papers: this item is included in nep-cis, nep-dev, nep-ger and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2014-07

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