The Impact Of Capital and Remittance Flows on Economic Performance in MENA Countries - Economic Research Forum (ERF)

The Impact Of Capital and Remittance Flows on Economic Performance in MENA Countries

Magda Kandil and Ida Mirzaie


Date:
September, 2008

NO.
440

Length:
34 pages

Topic:
F4. Macroeconomic Aspects of International Trade and Finance
F2. International Factor Movements and International Business

Abstract

Using data for a sample of developing countries, we analyze the effects of external flows, namely migrants’ remittances and FDI flows, on real output growth, price inflation, and components of aggregate demand. The historical evidence indicates unstable patterns of FDI inflows to a sample of nine MENA countries. In contrast, remittances flows appear to be more stable over time in recipient countries. Except in Jordan, real GDP growth does not vary significantly with FDI inflows. Tunisia provides the only significant evidence of an increase in price inflation in response to FDI, which is coupled with a significant increase in private investment. FDI flows stimulate a higher increase in imports in Egypt. Remittances inflows appear, in general, a more important determinant of macroeconomic performance. Remittances inflows stimulate real output growth in Jordan and decrease price inflation in Egypt and Tunisia. The increase in growth in Jordan is coupled with an increase in private consumption, private investment, real exports and imports with respect to remittances inflows. Moreover, remittances increase export growth in Tunisia

 

Research Fellows

Magda Kandil

Chief Economist and Director of Research, Central Bank of the United Arab Emirates


Research Fellows

Ida Mirzaie

Senior Lecturer, Department of Economics, The Ohio State University


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