Follow the Money: Remittance Responses to FDI Inflows

Michael Coon and Rebecca Neumann

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores the relationship between foreign direct investment and remittance flows. Using a panel of 79 countries, we estimate a random effects model and find a positive and significant relationship between the two capital flows. We account for the potential endogeneity of FDI to remittances by utilize a two-stage Instrumental Variables approach. These findings are indicative of a desire among the emigrant community to invest their income earned abroad in their home countries. We also explore regional characteristics to examine whether this relationship differs across regions. Consequently, we find this effect to be particularly important for Sub-Saharan African (SSA) and Latin American and Caribbean (LAC) countries.

Keywords: FDI flows; remittances; openness (search for similar items in EconPapers)
JEL-codes: F23 F24 (search for similar items in EconPapers)
Date: 2015-02-16
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Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/62220/1/MPRA_paper_62220.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/82303/1/MPRA_paper_82303.pdf revised version (application/pdf)

Related works:
Journal Article: Follow the Money: Remittance Responses to FDI Inflows (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:62220

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