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Working Paper

Do Capital Inflows Boost Growth in Developing Countries? : Evidence from Sub-Saharan Africa

CAPITAL MARKETS BORROWER FUTURE GROWTH FOREIGN CAPITAL ECONOMIC GROWTH CONCESSIONAL TERMS SIGNIFICANT EFFECT COMMODITY EXPORT INTERNATIONAL CAPITAL MONETARY ECONOMICS FOREIGN INVESTORS COUNTRY FIXED EFFECTS ECONOMIC LITERATURE INCOME INTEREST EXCHANGE ECONOMIC REVIEW DEVELOPING COUNTRIES POLITICAL ECONOMY WORLD DEVELOPMENT INDICATORS WELFARE FOREIGN DIRECT INVESTORS PRICE WEALTH DEVELOPING COUNTRY DEVELOPED COUNTRIES ECONOMIC ACTIVITY ADVANCED COUNTRIES LONG TERM DEVELOPMENT ECONOMICS ADVANCED ECONOMIES LOW-INCOME COUNTRIES FOOD PRICE DEBTS INTEREST RATES MONETARY FUND DEBT FINANCIAL CRISES PER CAPITA GROWTH FINANCIAL FLOWS EXPLANATORY VARIABLES BUSINESS CYCLE PRIVATE CAPITAL FLOWS LOANS PRIVATE CAPITAL OUTPUT GROWTH MACROECONOMIC VULNERABILITIES COMMODITY PRICE INVESTMENT DECISIONS EQUITY DEVELOPMENT RESEARCH GOLD STANDARD INVESTORS SOVEREIGN DEBT HUMAN CAPITAL COUNTRY LEVEL ECONOMIC PERFORMANCE CAPITAL VOLATILITY ECONOMIC STUDIES FUTURE FOREIGN DIRECT INVESTMENT FOREIGN INVESTMENT POOR COUNTRIES LEVELS OF CAPITAL INCOME COUNTRIES CAPITAL FLOWS INTERNATIONAL CAPITAL FLOWS PRIVATE SECTOR SOVEREIGN BORROWING ECONOMICS PUBLIC DEBT OUTPUT GROWTH DEBATE FIXED EFFECTS GOVERNANCE ECONOMIC DEVELOPMENT TRADE SOVEREIGN DEBTS INTERESTS GROWTH RESIDUALS ACCESS TO CAPITAL MARKETS FINANCIAL DEVELOPMENT GROWTH RESIDUAL FINANCIAL MARKET INTERNATIONAL FINANCIAL MARKET CROSS-COUNTRY EVIDENCE INVESTMENT GROWTH REGRESSIONS NEOCLASSICAL MODELS SHARE NEOCLASSICAL MODEL FINANCIAL MARKETS REAL OUTPUT CAPITAL INFLOWS EXTERNAL DEBT CONSUMER PRICE INDEX CAPITAL FLOW INCREASE GROWTH POLICY RESEARCH FOREIGN BORROWING MACROECONOMIC POLICIES GROWTH MEANS PRICE INDEX COMMODITY PRICES COUNTRY SPECIFIC COMMODITY DEVELOPMENT INDICATORS PRICES LEVEL OF CAPITAL DEVELOPMENT POLICY GROWTH
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World Bank, Washington, DC
Africa | North Africa
2015-07-16T14:52:33Z | 2015-07-16T14:52:33Z | 2015-06

This paper examines whether domestic output growth helps attract capital inflows and, in turn, capital inflows help boost output growth in a set of 38 Sub-Saharan African countries. Using a two-step approach to address reverse causality and omitted variable issues, the paper finds that output growth in countries in Sub-Saharan Africa does not attract capital inflows. However, aid and foreign direct investment inflows enhance growth, while sovereign debt inflows do not. A 1 percent increase in the level of real aid inflows raises growth of real output per capita by 0.022 percentage point. For foreign direct investment inflows, the figure is 0.002 percentage point.

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