INTERNATIONAL CAPITAL FLOWS AND DEVELOPMENT: FINANCIAL OPENNESS MATTERS EMPIRICAL EVIDENCE FROM NIGERIA
ABSTRACT
The issue of capital flows from rich to poor countries is exhaustively examined in this paper.International capital flows has diverse implication on the quest for developing countries, particularly Nigeria to achieve economic Development.
Using an empirical evidence in the context of Nigeria, the determinants of capital inflow and its relationship with economic development is empirically examine using time series data covering 1980 – 2010.
The findings derived from a rigorous analysis demonstrate that capital inflow and other complementary explanatory variables significant and positive determinants of economic development in Nigeria, with the exception of openness, which was though significant, had a negative apriori sign. The paper concludes with some policy recommendation of improving the policy environment, liberalising the financial sector, improving social infrastructure, massive investment in human capital development and institutional reform to steer economic development in Nigeria.
1. Introduction
The need for international capital inflow is rooted in the Harrod – Domar and chenery – strout two gaps models, which hold the views that developing countries could neither save enough nor import enough capital goods from abroad to satisfy their investment requirements. These models, therefore advocate that private foreign capital inflow and aid will be needed to bridge the two gaps
