Capital Mobility in African Countries

Abstract

It is well known that one of the important aspects of achieving sustainable development is to preserve macroeconomic stability, which is closely related to the extent of capital mobility. Given the importance of the subject for open economies, this paper examines the degree of capital mobility for African countries by using among other methodologies the Feldstein-Horioka coefficients. To determine those coefficients, we use time series data and methods, along with the Dynamic Heterogeneous panel approach. We find significant cross-country heterogeneity in the dynamic of income per capita, investment rate, and saving rate; and conclude that it is invalid to pool data across our sample countries. Furthemore, the empirical findings reveal that for African countries included in the sample, the estimated saving retention coefficients are at the same time, small and high indicating respectively higher and lower degrees of capital mobility and therefore, challenging the results of Feldstein -Horioka on developing countries.

Evolution of Capital Mobility in Sub-Saharan African Countries:

“…2 1.0 INTRODUCTION Mobility of capital plays a crucial role in economic performance such as promoting effectiveness of macroeconomic policies (Padawassou, 2012), determining the exchange and tax rates (Levich, 1985), optimizing savings and speeding up the pace towards stable economic growth (Murthy, 2005). Furthermore, understanding the degree to which a country's domestic investment responds to domestic savings offers crucial insights to policymakers (Payne and Kumazawa, 2005).…”