Exploring the nexus between capital inflows and growth in Latin America and the Caribbean: a study of clusters led by Brazil and Mexico

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 <ExternalRef> <RefSource>http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35816781 </RefSource> <RefTarget Address="http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35816781" TargetType="URL"/> </ExternalRef>, <CitationRef CitationID="CR23">2011</CitationRef>. The results show that effects of capital productivity and official development assistance are predominantly 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. Copyright Springer Science+Business Media Dordrecht 2014