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

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