DO FOREIGN AID AND REMITTANCE INFLOWS HURT COMPETITIVENESS OF EXPORTS OF PACIFIC ISLAND COUNTRIES? AN EMPIRICAL STUDY OF FIJI

Tiru Jayaraman (), Chee-Keong Choong and Pravinesh Chand
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Pravinesh Chand: University of the South Pacific, Fiji Islands

Journal of Economic Development, 2016, vol. 41, issue 2, 111-125

Abstract: Foreign aid and remittance inflows have been playing major roles in the economic growth and development of Pacific island countries (PICs). However, the relationship between these international capital inflows and export competitiveness of PICs has not been adequately studied. It is generally held that such capital transfers tend to hurt exports, a phenomenon known as Dutch disease. The objective of this paper is to examine the validity of the Dutch disease hypothesis in PICs with a case study of Fiji. Employing the bounds testing procedure, this empirical study reveals that inflows of both foreign aid and remittances have been contributing to the appreciation of Fiji¡¯s currency. The study establishes the validity of the Dutch disease hypothesis as far as Fiji is concerned.

Keywords: Foreign Aids; Remittances; Export Competitiveness; Cointegration; Granger Causality Test (search for similar items in EconPapers)
JEL-codes: F24 F35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:41:y:2016:i:2:p:111-125

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