Subscribe Now Subscribe Today
Science Alert
Curve Top
The International Journal of Applied Economics and Finance
  Year: 2010 | Volume: 4 | Issue: 4 | Page No.: 220-229
DOI: 10.3923/ijaef.2010.220.229
Facebook Twitter Digg Reddit Linkedin StumbleUpon E-mail

Capital Inflows and Investment in Developing Countries: The Case of Indonesia

Yuniarto Hadiwibowo

This study reviews the capital flows and investment in an open economy with the highest degree of capital account openness, managed exchange rate regime and high economic growth. We employ generalized error correction model to estimate the short-run and long-run relationships. The free capital mobility could be confirmed from the close relationship between domestic and benchmark interest rate. Interestingly, we find that investment moved one to one with saving. In this sense, the amount of capital inflows was not correlated with domestic investment. Net factor income from abroad offset capital inflows. Therefore, simplistic policy to attract capital inflows may not always be the optimal solutions for developing countries. The net resource flows should be taken into account. Not only interest payment for foreign debt, income payment for direct investment might also cause a high burden on the economy. Developing countries should design policies to improve domestic productivity.
PDF Fulltext XML References Citation Report Citation
  •    Analysis of Causal Relationship Between Tourism Development, Economic Growth and Foreign Direct Investment: an ARDL Approach
  •    The Employment Effect of ICTs in the Organization of Islamic Conference
  •    An Assessment of the Impact of Exchange Rate Deregulation and Structural Adjustment Programme on Cotton Production and Utilization in Nigeria
  •    The J-curve: Evidence from Commodity Trade Between Malaysia and Japan
  •    External Debt: Some Experience From Turkish Economy
  •    The Importance of Financial Stability for Capital Flows to Emerging Economies Referring to the African Continent and South Africa
How to cite this article:

Yuniarto Hadiwibowo , 2010. Capital Inflows and Investment in Developing Countries: The Case of Indonesia. The International Journal of Applied Economics and Finance, 4: 220-229.

DOI: 10.3923/ijaef.2010.220.229






Curve Bottom