Foreign capital flows and economic growth: A cross country panel analysis

 Remittances, foreign direct investment (FDI), official development assistance (ODA) and long-term net private foreign currency loans (NPF) have dynamic impact to change a country’s economic growth. These forms of inward foreigncapital have a direct impact on a country’s economic growth and development process, but their ability to change macroeconomics and trade generate concern over the ability to sustain long-term economic growth. The impact levels of remittance to economic growth, selected macroeconomic factors and trade balances are large and dynamic compared to FDI, ODA and NPF. However, comparing ODA with FDI, the former significantly reduces economic growth as well as reduces macroeconomic stability. Meanwhile, long-term private  foreign  currency  loans  (NPF)  have  had  significantly  positive  impacts  on economic growth and macroeconomic factors. Inward foreign capital can become a significant contributor to economic growth in developing countries, but it is dependent on  institutional  support  and  strong  macroeconomic  policy  (fiscal  and  monetary) development.  The  results  in  this  study  are  based  on  robust  regression  estimations including fixed, random, pooled OLS and IV models.