Modelling the Impact of Short-term Foreign Capital on Economic Growth in COMESA: A Dynamic Panel Analysis

Kenya - 12 February 2018

This study uses country level panel data to investigate the impact of short term foreign capital flows on the Gross Domestic Product per Capita in 19 member countries of the Common Market for Eastern and Southern Africa (COMESA) over the 2000-2014 period. The estimates are generated using the One-step Generalised Method of Moments (GMM) difference estimator. The study found that short term foreign capital flows and absorptive capacity exerted a positive impact of GDP per capita in the COMESA region. Additionally, the absorptive capacity has a positive effect on the ability of the COMESA region to absorb and benefit from the spillovers of foreign capital flows. The findings suggest that the countries of the COMESA region should encourage short term capital flows and improve on the absorptive capacity in order to continue realizing positive economic growth from the said flows.

Author(s): Kitonyo, P., Kiriti-Nganga, T. and Abala, D. (2017, Current Research Journal of Economic Theory, Vol. 9, Issue No. 3, pp. 13-24