Endogenous specification of foreign capital inflows, human capital development and economic growth

Abstract

Purpose The purpose of this paper is to empirically investigate the relationship between foreign capital inflows, human capital development (HCD) and economic growth in ECOWAS countries. Design/methodology/approach In line with the augmented Solow model, the relationship between foreign capital inflows, human capital development and gross domestic product in the ECOWAS member countries is investigated using the pool mean group method. Findings The authors find overwhelming evidence that foreign capital inflows and human development have a significant effect on economic growth in ECOWAS member countries. However, foreign direct investment (FDI), official development assistant, HCD and gross domestic investment are positively related to economic growth in sub-regions economies. Conversely, migrate official remittance, portfolio investments and external debts are negatively related to economic growth. Research limitations/implications The authors recommend that sound economic policies should be targeted in encouraging foreign capital accumulation and HCD, especially on FDI, official development assistance that exerts a positive impact on the economic growth of the sub-region. Therefore, training is required to prepare the labor force to work with new technologies and promote efficient enterprise for ECOWAS economies to compete with developed countries and emerging economies. Social implications This study argued that the development of human capital is a pathway that may lead countries away from sustained growth. In the context of any economy which lack well-developed capital and education markets, many otherwise qualified citizens may be denied the basic skills they need in order to contribute fully to the nation’s economic development. HCD would encourage foreign investments, resulting in reduction in poverty in ECOWAS countries. Originality/value Several studies have been done on foreign capital inflow and economic growth nexus such as Orji et al. (2014), Ajide and Raheem (2016), Musibau et al. (2017), etc.; however, none of the research studies has actually examined the effect of the relationship between foreign capital inflows and HCD on economic growth in ECOWAS countries. This study is designed to fill the vacuum.

Short and Long Run Dynamic Common Correlation Effects of External Capital Inflow on Economic Growth in SSA Countries

“…This negative effect can be due to the fungible nature of most official development aid flowing into the sub region. This outcome confirms the findings of Musibau et al (2019) and contradicts Juselius et al (2014). On the other hand and in line with the findings of Bird and Choi (2020) FDI is positive and statistically significant at 5% for all the four models employed.…”

“…With the global village nature of the world today, where shock in one country affect other countries, economic analyses have tend to adopt more robust methodologies that account for cross country dependence. Most existing studies in this domain have mainly used conventional estimation techniques like FE, RE and GMM (Bird & Choi, 2020;Karagoz & Caglar, 2016), Pooled mean group (PMG) and panel VAR (Guei, 2019;Juselius, Møller, & Tarp, 2014;Musibau, Yusuf, & Gold, 2019) which does not account for cross sectional dependence. Ali, Yusop, Kaliappan, and Chin (2020) noted that these conventional technique produce biased estimate in the presence of cross sectional dependence.…”

Capital and Liquidity Risks and Financial Stability: Pre, During and Post Financial Crisis Between Islamic and Conventional Banks in GCC Countries, in the Light of Oil Prices Decline

“…We start our analysis to test the presence of unit root (data stationarity) of each variable in time series data. It is essential to test the order of the series or presence of unit root in the series in order to get an appropriate panel model (Musibau, Yusuf, & Gold, 2019). Whereas, there are several tests usually used for this purpose, such as Levin and Lin (1993), Hadri (2000), Levin, Lin and Chu (LLC) (2002) and Shin (1997, 2003).…”

“…Thus, this paper used the most common tests such as Levin et al (LLC) (2002) and Shin (1997, 2003) as also considered the two recent unit root tests (Annala & Chen, 2011). According to Musibau et al (2019), the main hypothesis of panel unit root as established in LLC is as shown in equation 4. ∑…”

Does Financial Instability of Conventional Banks Affect Financial Stability of Islamic Banks in GCC Countries?

“…We start our analysis to test the presence of unit root (data stationarity) of each variable in time series data. It is crucial to test the order of the series or presence of unit root in the series in order to get an appropriate panel model (Musibau, Yusuf, & Gold, 2019). Whereas, there are several tests usually used for this purpose, such as Levin and Lin (1993), Hadri (2000), Levin, Lin, and Chu (LLC) (2002) and Shin (1997, 2003).…”