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Capital Inflows and Growth: Evidence from Pre-Crises ASEAN Economies

In: Studies In East Asian Economies Capital Flows, Exchange Rates and Monetary Policy

Author

Listed:
  • Shibeshi Ghebre Kahsay

    (Abu Dhabi Women's College, UAE)

  • Jagdish Handa

    (McGill University, Canada)

Abstract

This chapter uses an endogenous growth framework to examine the effects of the different types of long-term capital inflows (foreign investment, foreign aid and long-term debt capital) on the long-term growth performance of Indonesia, Malaysia, Philippines and Thailand over the period 1970–96, which preceded their financial crises. Its econometric analysis uses stationary tests, cointegration and ECM modeling, as well as VAR techniques and causality tests. Our findings support the endogenous growth arguments for Malaysia, Philippines and Thailand but do not support them for Indonesia. For all four countries, significant positive causation runs from equity capital, public capital and openness to per capita income growth, while long-term debt capital inflows had adverse or insignificant effects on growth.

Suggested Citation

  • Shibeshi Ghebre Kahsay & Jagdish Handa, 2011. "Capital Inflows and Growth: Evidence from Pre-Crises ASEAN Economies," World Scientific Book Chapters, in: Studies In East Asian Economies Capital Flows, Exchange Rates and Monetary Policy, chapter 2, pages 17-52, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814338950_0002
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