Capital Mobility, Foreign Aid, Remittance, and Openness in Sub-Sahara African Countries

This paper extends Payne and Kumazawa (2005) based on the FeldsteinHorioka (1980) specification by introducing one more variable, “remittance,” into the model and specifically by addressing structural change issues using Chow tests for a different sample of 27 countries and over the 1982-2010 time frames. Accounting for these latter factors generates significantly different results than Payne and Kumazawa. We find that the remittance variable is positive and statistically significant across pooled ordinary least squares (POLS), fixed effects (FE), and random effects (RE) estimators. Furthermore, the inclusion of remittance appears to increase the magnitudes of the savings and foreign aid coefficients.