Abstract
On the front burner of developing countries’ economic policy is the pursuit of economic growth and development. This however has been hindered by inadequate resources needed to drive the process of growth and development. One of the key components fronting the movement in support of economic globalization and integration is capital flows considering its complementarity effect in bridging the gap between domestic savings and investment. This study therefore examines the impact of capital flows on economic growth in Nigeria using data covering the period 1981 to 2016 and sourced from the Central Bank of Nigeria. The method of error correction model framework and autoregressive distributed lag was adopted in estimating our specified model. Findings from our estimated model reveal that capital flows significantly affect economic growth in Nigeria. The study thus recommends that, sound, robust and vigorous economic policies be formulated with the sole purpose of attracting and drawing capital flows into the country that helps to bridge the needed capital for economic growth and development in Nigeria.
Highlights
The desire for capital by developing countries as complement to domestic savings for growth and development has existed for many decades
Whereas foreign direct investment might pose a negative impact on growth in the short run, it goes to have a significant impact on growth in the long run
The main thrust of this research work is to ascertain the impact of capital flows on economic growth in Nigeria
Summary
The desire for capital by developing countries as complement to domestic savings for growth and development has existed for many decades This is spurred by the gap between savings and investments required to sustain economic growth and evidenced by the attention given to the drive for foreign capital as an important source of augmenting the saving-investment gap in most resource deficient economies especially in developing countries (Adeola, 2017; Orji, Uche and Ilori, 2014; Nwosa and Amassoma, 2014). This has led to the arguments that external financing is.
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