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Capital Flows to Least Developed Countries: What Matters?

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  • Hossain, Monzur

    (Senior Research Fellow)

Abstract

This paper analyses determinants and persistency of capital flows (foreign direct investment, debt and official aid) to least developed countries (LDCs) for the period 1991 - 2012. The results indicate that capital flows to LDCs, particularly FDI and external debt, are associated with various factors, such as macroeconomic stability, financial sector development, trade openness, natural resource abundance and political environment. However, the determinants of capital flows vary significantly across regions. While FDIs are of natural resource seeking type in Africa, it is mostly efficiency seeking in Asia. The results suggest for appropriate policies aimed at improving macroeconomic and financial environment along with political stability in order to ensure more capital flows to LDCs.

Suggested Citation

  • Hossain, Monzur, 2015. "Capital Flows to Least Developed Countries: What Matters?," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 38(2), pages 95-113, June.
    • Handle: RePEc:ris:badest:0783
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    1. Udvari, Beáta & Dávid Kiss, Gábor & Pontet, Julianna, 2016. "Challenges of Missing Data in Analyses of Aid Activity: The Case of US Aid Activity," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 39(1-2), pages 1-25, March-Jun.

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    More about this item

    Keywords

    Capital Flows; LDCs; GMM Estimator; BPoA; IPoA;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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