Development Implications of Cross-Border Capital Flows: A Focus on Living Standards in the ECOWAS Sub-Region

This study provides new insights into the link between cross-border capital flows and living standards in the ECOWAS sub-region with a focus on Ghana, Guinea, Liberia, Nigeria, Sierra Leone, Niger, Mali, Senegal, Cote d'Ivoire and Burkina Faso. This was motivated by the growing recognition of the West African sub-region as an important destination for foreign capital in recent times. Thus, we employed the pooled mean group (PMG) estimator and the Hausman test to analyse panel datasets from the World Bank database and the International Monetary Fund (IMF) Financial Statistics. The findings showed that FDI inflows significantly increased GNI per capita growth, thus creating an opportunity for a long-term improvement in living standards. Similarly, there is evidence of significant improvements in living standards following an increase in remittances and Official Development Assistance (ODA) inflows. This highlights the importance of personal remittances and foreign aid in boosting GNI per capita in the ECOWAS sub-region. However, the results showed that external debt has a negative and significant effect on GNI per capita, thus highlighting the ineffectiveness of external debt as foreign loan inflows have not translated to better living standards in the ECOWAS sub-region. Hence, it is recommended for policymakers in the ECOWAS sub-region to intensify their efforts to mobilise foreign capital by prioritising economic and political stability, as well as fostering good institutions, while ensuring that foreign aid by donor organisations is put to good use for longer-term improvement in living standards.