Governance and the Effectiveness of Foreign Capital

This study empirically investigates the impact of foreign capital and governance on the economic growth by employing country level data from 1984 to 2010 for Asian developing countries. Governance; foreign aid and FDI positively affect the growth (per capita income) however, higher levels of debt are associated with slow growth rates. Results of the study are statistically highly significant and in accordance to prior expectations and economic theory. The robustness of the results is confirmed by performing the sensitivity analysis.