The Impact of Foreign Capital Inflow on Savings and Investment: The Case of Pakistan

1987 ◽  
Vol 26 (4) ◽  
pp. 787-789 ◽  
Author(s):  
Naheed Aslam
Keyword(s):  
Interest Rates ◽  
Foreign Capital ◽  
Capital Inflow ◽  
Capital Inflows ◽  
Foreign Assistance ◽  
Domestic Capital ◽  
Foreign Loans ◽  
Foreign Capital Inflows ◽  
The Impact ◽  
Over Time

The paper examines the role of foreign capital in the context of savings and investment for Pakistan for the period of 1963-64 - 1984-85. The question of the impact of foreign capital inflows on domestic resources has assumed primary importance in view of the increasing debt burden and declining concessionality of foreign loans. The data analysis! , based on the classification of loans according to rates of interest and terms to maturity, reveals that the terms and conditions of foreign loans have become more stringent over time, i.e. higher interest rates and lower maturity periods. The worsening terms and conditions of external loans have resulted in increasing reverse flow obligations. Debt servicing as a ratio of export earnings and foreign capital inflow has rapidly increased over time. During 1960-61 - 1970-71, debt-servicing obligations could be met from 14.85 percent of foreign assistance or 10.29 percent of our commodity export earnings, whereas during 1980-81 - 1984-85 foreign debt servicing could be financed from 29.63 percent of export earnings or 64.79 percent of foreign assistance. The heavy debt-servicing burden and unfavorable outlook for external finance has made it absolutely essential that foreign capital funds should generate internally the capacity to repay these loans. This could be facilitated if foreign capital inflows augment domestic capital formation efforts.

scholarly journals Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan

1997 ◽  
Vol 36 (2) ◽  
pp. 115-129 ◽  
Author(s):  
Zafar Iqbal
Keyword(s):  
Public Sector ◽  
Foreign Capital ◽  
Positive Impact ◽  
Large Fraction ◽  
Capital Inflows ◽  
Foreign Assistance ◽  
The Public ◽  
Foreign Capital Inflows ◽  
The Government ◽  
The Impact

The main aim of this paper is to demonstrate the impact of foreign capital inflows on government’s fiscal behaviour in Pakistan. Government’s fiscal response is measured in terms of social, non-development, and development expenditures as well as revenues. This paper specifies and estimates a fiscal behaviour model for the period 1976–95. The threestage least squares results suggest that foreign capital flows into the public sector have strong positive impact on social and non-development expenditures and, in contrast to what the government and donor agencies believe, have little effect on development spending. In other words, proceeds from foreign loans and aid are largely consumed rather than invested productively. The results also reveal the strong substitutable interdependence between social and non-development expenditures. Furthermore, the finding clearly demonstrates that foreign assistance causes a strong shift of public domestic resources from development projects to non-development activities. In addition to the above, the results show that a large fraction of government revenues is used to finance social and non-development expenditures. The results also demonstrate that foreign assistance enhances taxation efforts of the Government of Pakistan.

Foreign capital inflows and economic growth: the experience of low-income countries in Sub Saharan Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Atif Awad
Keyword(s):  
Low Income ◽  
Foreign Capital ◽  
Ordinary Least Squares ◽  
Capital Inflows ◽  
Sub Saharan Africa ◽  
Low Income Countries ◽  
Content Type ◽  
Long Run ◽  
Foreign Capital Inflows ◽  
The Impact

Purpose This paper aims to investigate the long-run impact of selected foreign capital inflows, including aid, remittances, foreign direct investment (FDI), trade and debt, on the economic growth of 21 low-income countries in the Sub Saharan Africa (SSA) region, during the period 1990–2018. Design/methodology/approach To obtain this objective and for robust analysis, a parametric approach, which was dynamic ordinary least squares, and a non-parametric technique, which was fully modified ordinary least squares, were used. Findings The results of both models confirmed that, in the long run, trade and aid affected the growth rate of the per capita income in these countries in a positive way. However, external debt seemed to have an adverse influence on such growth. Originality/value First, this is the initial study that has addressed this matter across a homogenous group of countries in the SSA region. Second, while most of the previous studies regarding capital inflows into the SSA region have focused on the impact of only one or two aspects of such foreign capital inflows on growth, the present study, instead, examined the impact of five types of foreign capital inflows (aid, remittances, FDI, trade and debt).

scholarly journals Cross Border Portfolio Investment and The Volatility of Stock Market Index and Rupiah's Rate

2015 ◽  
Vol 17 (4) ◽  
pp. 403-432 ◽  
Author(s):  
Al Muntasir
Keyword(s):  
Foreign Capital ◽  
Composite Index ◽  
Capital Flow ◽  
Capital Inflows ◽  
Stock Market Index ◽  
Dynamic Relationship ◽  
Market Index ◽  
Daily Data ◽  
Foreign Capital Inflows ◽  
The Impact

This paper use daily data during the period 2010-2014 to analyse the impact of foreign capital inflows on capital market volatility and on the volatility of Rupiah’s rate. The results shows the flow of foreign capital positively affect the Jakarta Composite Index (JCI) but not the rate of Rupiah. Using Vector Error Correction Model, this paper finds a cointegrated and dynamic relationship between the changes in foreign capital flow in Indonesia, with the JCI and the exchange rate of Rupiah against USD. Changes in the Rupiah’s rate significantly affect the foreign capital flow and the JCI, while the JCI does not significantly affect the flow of foreign capital and the changes of Rupiah’s rate.

scholarly journals The impact of foreign capital inflows on poverty in Vietnam: An empirical investigation

2021 ◽  
Vol 7 (2) ◽  
pp. 31-49
Author(s):  
Mercy T. Musakwa ◽  
Nicholas M. Odhiambo ◽  
Sheilla Nyasha
Keyword(s):  
Foreign Capital ◽  
Household Consumption ◽  
Capital Inflows ◽  
Infant Mortality Rate ◽  
Consumption Expenditure ◽  
Poverty Measure ◽  
Long Run ◽  
Short Run ◽  
Foreign Capital Inflows ◽  
The Impact

Abstract This study investigates the impact of foreign capital inflows on poverty in Vietnam, using annual time series data from 1990 to 2018. The study was motivated by the need to establish if burgeoning foreign capital inflows in Vietnam can support the poverty alleviation agenda. Foreign direct investment (FDI) and external debt were used as proxies for foreign capital inflows; and infant mortality rate, Human Development Index (HDI) and household consumption expenditure were used as poverty proxies. Using the autoregressive distributed lag (ARDL) approach, the study found foreign direct investment to reduce poverty in the short run and long run when household consumption expenditure was used as a poverty measure. However, the study found FDI to worsen poverty in the short run when infant mortality rate and HDI were used as poverty proxies. The study found external debt to have poverty mitigating effect in the short run regardless of the poverty measure used and in the long run only when household consumption expenditure was used as a poverty measure.

scholarly journals Financial Liberalization, Economic Growth and Investment Strategy: Lessons from Taiwan for New Industrial Countries

2015 ◽  
Vol 3 (2) ◽  
pp. 188 ◽  
Author(s):  
Yu-Wei Lan ◽  
Dan Lin ◽  
Lu Lin
Keyword(s):  
Economic Growth ◽  
Institutional Investors ◽  
Foreign Capital ◽  
Investment Strategy ◽  
Capital Inflows ◽  
Investment Efficiency ◽  
The Real ◽  
Foreign Capital Inflows ◽  
Foreign Institutional Investors ◽  
The Impact

<p><em>To examine the impact of foreign capital inflows on Taiwan’s economy after internet bubbles of 2000, this study adopts data from the first quarter of 2001 to the second quarter 2015 to test if foreign capital inflows have positive impacts on Taiwan’s economic growth. This study also uses program trading and aims to prove that with financial liberalizations, the investment efficiency of foreign institutional investors is better than domestic institutional investors.</em></p><p><em>The results from the error correction model shows that capital formation, domestic savings and foreign direct investment all have positive relationships with the real economic growth. However, the rate of financing and foreign debt and depreciation all have negative relationships with the real economic growth. The results are all statistically significant. Hence, they do not completely support the hypothesis that foreign capital inflows are beneficial for economic growth.</em></p><p><em>Moreover, this study proves that the futures market in Taiwan is not strong-form market efficient. This result provides support for the hypothesis that the investment efficiency of foreign institutional investors is higher than that of domestic institutional investors. Investors can therefore raise their investment performance by following the investment strategies of foreign institutional investors.</em></p>

scholarly journals Impact of Foreign Capital Inflows on Household Savings in Pakistan

2020 ◽  
Vol 5 (4) ◽  
Author(s):  
Muhammad Abdullah Idrees ◽  
Ayesha Khan ◽  
Muhammad Arsalan Khan ◽  
Muhammad Bilal Raees ◽  
Muniza Syed
Keyword(s):  
Foreign Direct Investment ◽  
Foreign Aid ◽  
Direct Investment ◽  
Foreign Capital ◽  
Capital Inflows ◽  
Household Savings ◽  
Statistical Tools ◽  
Household Saving ◽  
Foreign Capital Inflows ◽  
The Impact

This study aims to discover the impact of foreign capital inflows (FDI, RT and FA) on household savings of Pakistan. Data used in this study has been obtained from the website of State Bank of Pakistan for the period of 1981-2010. Statistical tools including multiple regressions analysis was applied for analysis. Results explain that foreign direct investment (FDI), remittances (RT) are having positive and significant impact on household saving (HS) but foreign aid (FA) is having negative and insignificant impact on household saving, so it is recommended that if a developing country like Pakistan wants to increase the household saving it should give thoughtful importance to FDI and RT than FA with respect to household savings in Pakistan.

scholarly journals Inflationary Rate in Nigeria: Impact of Foreign Capital Inflows

2021 ◽  
Vol 7 (1) ◽  
pp. 44-54
Author(s):  
Olabode Eric Olabisi
Keyword(s):  
Foreign Capital ◽  
Negative Impact ◽  
Forecast Error ◽  
Daily Basis ◽  
The Body ◽  
Capital Inflows ◽  
Parameter Estimates ◽  
Long Run ◽  
Foreign Capital Inflows ◽  
The Impact

As the prices of daily needs are aggravating in Nigeria, the value of the country’s currency (naira) is less appreciated on a daily basis, and this pose a threat to a good standard of living in Nigeria. Therefore, this study investigated the impact of foreign capital inflows on the persistent increase in inflation in Nigeria over the period of 1985 to 2019. The Autoregressive Distributed Lags was used to obtain the parameter estimates of the long run relationship between foreign capital inflows and inflation. By using the Forecast Error Variance Decomposition techniques, the cause-effect analysis of foreign capital inflows and inflation was determined. Results provide evidence of a long run relationship between the series. Results further indicate that inflation is sensitive to foreign capital inflows variables such as net official development assistance received and remittance inflows in Nigeria. Policies that reduce the negative impact on inflation are recommended in the body of the paper.

scholarly journals The impact of foreign capital shifts on economic activities and asset prices: a threshold VAR approach

2020 ◽  
Vol 4 (3) ◽  
pp. 87-104
Author(s):  
Boubekeur Baba ◽  
Güven Sevil
Keyword(s):  
South Korea ◽  
Emerging Markets ◽  
Asset Prices ◽  
Foreign Capital ◽  
Emerging Market ◽  
Capital Inflows ◽  
Economic Activities ◽  
Content Type ◽  
Foreign Capital Inflows ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea. Design/methodology/approach The authors in this paper apply the Bayesian threshold vector autoregressive (TVAR) model to estimate the regimes of large and low inflows of foreign capital. Then, structural impulse-response analysis is used to check whether the responses of the variables differ across the estimated regimes. The model is estimated using quarterly data of foreign capital inflows, gross domestic product (GDP), consumer price index, credit to the private non-financial sector, real effective exchange rate (REER), stock returns and house prices. Findings The main findings suggest that large inflows of gross foreign capital, foreign direct investments (FDI) and foreign portfolio investments (FPI) are ineffective to boost economic growth, but large inflows of other foreign investments (OFIs) significantly contribute to GDP. The decreases in the foreign capital inflows are associated with larger depreciation of REER. The large inflows of gross foreign capital, FDI and OFIs are associated with further expansion of credit supply to private non-financial sectors. Research limitations/implications The policy implications of foreign capital inflows are of particular importance to all the emerging markets alike. However, the empirical analysis is limited to the case of South Korea due to various reasons. The experience with international capital inflows among emerging markets is heterogeneous. Therefore, it would be better to take each case of emerging market individually. In addition, TVAR analysis requires a long data sample, which unfortunately is not available for most of the emerging markets. Originality/value The foreign capital inflows are shown to be procyclical and notoriously volatile in many studies. Nevertheless, this topic has commonly been studied using linear VAR models, which do not properly deal with the cyclical characteristics of foreign capital inflows. This study attempts to resolve these methodological limitations by examining a non-linear VAR model that is capable of capturing the structural breaks associated with the cyclical behaviors of foreign capital inflows.

scholarly journals The Impact of Foreigners’ Trades on Equity Prices: Evidence from Macedonian Stock Exchange

2020 ◽  
Vol 15 (1) ◽  
pp. 56-65
Author(s):  
Julijana Angelovska
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Capital Inflows ◽  
General Belief ◽  
Price Pressure ◽  
Domestic Capital ◽  
Base Broadening ◽  
Foreign Capital Inflows ◽  
The Impact

AbstractEmerging countries’ economies are dependent on foreign capital inflows. For policy makers and researchers of particular interest is to understand the nature of these flows and their impact on the domestic capital market. The first significant foreign inflows entered the Macedonian Stock Market at the end of 2004, and stock prices were increased. It was general belief among the investors that foreigners are driving the prices on the Macedonian Stock Market. This study examines the influence of foreign investors’ trades on stock returns in Macedonia using base broadening and price pressure hypotheses. Strong evidence consistent with the base-broadening hypothesis shows that 1% of monthly net inflows as a percentage of last month market capitalization is connected with 7% rise in monthly returns on the Macedonian stock market. The findings do not support the price pressure hypothesis, so the rise in the prices is permanent.

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