Qual Quant (2014) 48:2537–2552
Exploring the nexus between capital inﬂows and growth
in Latin America and the Caribbean: a study of clusters
led by Brazil and Mexico
Ronald Ravinesh Kumar
Published online: 10 July 2013
© Springer Science+Business Media Dordrecht 2013
Abstract In this paper, we used pooled regression within the ARDL approach and augmented
Solow framework to explore the emerging uniformity and polarization in the two clusters
led by Brazil and Mexico in Latin America and the Caribbean, adopted from Izquierdo
and Talvi http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35816781, 2011.The
results show that effects of capital productivity and ofﬁcial development assistance are pre-
dominantly led by Brazil cluster while remittances, foreign direct investment and domestic
credit are led Mexico cluster. While ODA is has a negative effect on the region’s growth,
capital productivity, remittances, domestic credit and foreign direct investment are promising
indicators for short-run and long-run growth in the region.
Keywords Personal remittances · FDI · ODA · Financial development · Brazil · Mexico ·
LAC · Capital inﬂows · Growth
The aftermath of recent ﬁnancial crisis has given a an added impetus to the role of capi-
tal inﬂows such as domestic credits, foreign direct investment (FDI), ofﬁcial development
assistance (ODA), and personal remittance as a means of boosting investment, consumption
and speeding-up the recovery process. The focus of this paper is Latin America and the
Caribbean (LAC) region. Overall, LAC countries receive relatively low levels of inﬂows.
However, when considering individual countries in the region, the levels are apparently var-
ied with high levels for some while low levels for others. Moreover, there are countries within
the region with signiﬁcant similar characteristics.
Disclaimer The views expressed in the paper are those of the author’ and does not necessarily reﬂect the
views of his afﬁliated institution.
R. R. Kumar (
School of Economics, University of the South Paciﬁc, Suva, Fiji
e-mail: kumar_RN@usp.ac.fj; firstname.lastname@example.org