Capital Flow, Capital Control, and Economic Growth: Evidence from Developed & Developing Economies

Abstract

Purpose: The current paper analyzes the effects of capital flow and capital control on economic growth in developed and developing countries. We used four main components of capital flow such as, FDI, exports, remittances and external debt Design/Methodology/Approach: The econometric models are tested by using the annual data of 1995-2017 from 54 countries, classified as developed (high-income) and developing (middle-income) economies. Findings: Empirical estimation of PMG revealed that all four components of capital flow augment the economic growth in both developed and developing countries. However, restrictions on these flows reduces the impact of FDI, external debt and exports but raises the influence of remittances on the economic growth. Implications/Originality/Value: The findings of this paper also provides some useful insights for policymakers to use capital control as a tool for economic progress.