Title: Determinants of external financial flows to the Southern African development community region: an empirical study

Authors: Forget Mingiri Kapingura; Sylvanus Ikhide; Asrat Tsegaye

Addresses: University of Fort Hare, East London Campus, South Africa ' University of Stellenbosch Business School, Bellville Park, South Africa ' University of Fort Hare, East London Campus, South Africa

Abstract: The study examines the determinants of three forms of foreign capital, cross-border bank flows (CBF), foreign direct investment (FDI) and oversees development assistance (ODA) in the SADC region over a period from 1980 to 2012 utilising the 3SLS model and the GMM. The empirical results reveal that both domestic and foreign factors are important determinants of private external financial flows (FDI and CBF) to the SADC region. In all the regressions estimated in the study, foreign variables emerged to be significant in influencing the flow of finance to the region. This suggests that events in developed countries can reduce the amount of external financial flows to the developing countries. Thus, relying on foreign capital flows may humper growth prospects in the SADC countries. This therefore suggests that mobilisation of domestic resources can be an avenue worth exploring to enable sustainable long-term growth in the region.

Keywords: SADC; foreign capital; 3SLS; generalised method of moments; GMM.

DOI: 10.1504/GBER.2018.090066

Global Business and Economics Review, 2018 Vol.20 No.2, pp.141 - 160

Received: 03 Dec 2015
Accepted: 11 Jul 2016

Published online: 28 Feb 2018 *

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