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Document Type

Article

Source Publication

Policy Research Working Papers (World Bank)

Keywords

Capital Flows, Foreign Direct Investment, Economic Development

Disciplines

Business | Economics

Abstract

Husain and Jun compare the experiences of selected Asian countries in attracting different forms of external financing and examine how that financing has contributed to growth, carrying out the analysis for two subgroups—South Asian and ASEAN countries—with distinctly different dominant forms of capital flows. After reviewing recent trends in financial flows to individual countries, they perform a statistical analysis of the effects of foreign capital flows on the macroeconomic performance of developing countries in the region, finding that foreign direct investment has been a more significant positive factor than other types of resource flows in shaping the economic growth of ASEAN countries. Substantial increases in ODA flows are unlikely, and so is the resumption of significant bank lending, so policymakers in South Asia should pursue policies and nondistortionary incentive systems conducive to the infusion of foreign direct investment flows.

Note

This paper is a product of the Debt and International Finance Division, International Economics Department, part of a larger effort in the Department to analyze the trends and determinants of capital flows to developing countries.

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