Net private capital flows and economic growth-the case of emerging Asian economies

Xuan Vinh Vo ()

Applied Economics, 2010, vol. 42, issue 24, pages 3135-3146

Abstract: This article makes an exploratory empirical investigation into the relationship between net private capital flows and economic growth using a panel dataset from emerging Asian countries, namely South Korea, Indonesia, Malaysia, Thailand and the Philippines, over the period 1980-2001. Overall, this article indicates that net private capital helps to promote economic growth for the countries in the sample. In addition, this article also supports the view that net private capital flows will better contribute to economic growth under a sound policy and economic environment. This article also seeks to improve the estimation results by controlling for reverse causality as an econometric method that can control, for reverse causality is very important to examining the relationship between net private capital flows and economic growth. To tackle this issue, this article employs the Generalized Method of Moments (GMM) estimation technique, which is an econometric technique that can handle the reverse causality using the lagged explanatory variables as instruments.

Date: 2010
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