The International Capital Flows and Domestic Savingsdomestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions
- Title
- The International Capital Flows and Domestic Savingsdomestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions
- Creator
- Pal S.
- Description
- Drawing inspiration from Feldstein and Horiokas (1980) (FH) puzzle, our study elucidates the impact of remittances and Foreign Direct Investment (FDI) on domestic savings and investment in two disparate yet globalized developing regions: Latin America and the Caribbean and South Asia. Utilizing an extensive dataset spanning from 1984 to 2021 and employing diverse methodologies, including Dynamic System generalized method of moment, DriscollKraay standard error, fully modified ordinary least squares, and dynamic ordinary least squares, our findings reveal that remittances exert a positive influence on both domestic investment and savings across both regions. However, South Asia predominantly directs remittance inflows towards investment, while Latin America and the Caribbean exhibit a propensity towards saving these funds. As for FDI, the primary developing region predominantly channels these funds into investment, whereas the lower region prioritizes savings. The impact of control variables manifests varied effects across both regions. Ultimately, our study underscores the pivotal role of foreign remittances in supporting investment and savings, underscoring the profound influence of economic growth on these dynamics. This accentuates the imperative for governments to proactively allocate financial resources to optimize economic growth and fortify financial frameworks. Moreover, focused strategies are indispensable for adeptly managing foreign inflows while navigating external shocks such as international repayments, external debt, and aid. Additionally, enhancements in monetary and fiscal policies are imperative to sustain competitive interest rates and foster stable macroeconomic conditions, thereby fostering conducive environments for both public and private domestic savings. JEL Classification: F24; F3; P33; C23; O18 2024 The Author(s).
- Source
- South Asian Journal of Macroeconomics and Public Finance, Vol-13, No. 2, pp. 169-212.
- Date
- 2024-01-01
- Publisher
- SAGE Publications Ltd
- Subject
- developing regions; domestic investment; domestic savings; foreign capital flows; panel model; Remittance
- Coverage
- Pal S., Department of Humanities and Social Sciences, Indian Institute of Technology, West Bengal, Kharagpur, India, School of Business and Management, Christ Deemed to be University, Karnataka, Bangalore, India
- Rights
- Restricted Access
- Relation
- ISSN: 22779787
- Format
- Online
- Language
- English
- Type
- Article
Collection
Citation
Pal S., “The International Capital Flows and Domestic Savingsdomestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions,” CHRIST (Deemed To Be University) Institutional Repository, accessed February 24, 2025, https://archives.christuniversity.in/items/show/12716.