DIASPORA FINANCE, FOREIGN DIRECT INVESTMENT AND TRADE FLOWS IN THE BRICS COUNTRIES

Abstract

The literature suggests demonstrable links between the presence of diaspora and increased trade just as countries are increasingly mobilising more diaspora finance to improve investment and trade. This paper deployed ARDL model to determine the effects of DIF and FDI on trade in the BRICS countries for 42 years (1980 – 2022). Results show heterogeneous short-run effects of DIF and FDI on trade in BRICS. Similarly, there are mixed long-run effects for Brazil, China and South Africa but not be ascertained for Russia and India. The implication is that DIF and FDI are appropriate strategies for short-run export growth and import control in the BRICS countries but are not appropriate for long-run export-oriented policy in Russia and import-control strategies in Russia, China, India and South Africa. In practice, therefore, the countries should incorporate diaspora finance and FDI only in their short-run export-growth and import control strategies, while only Brazil should do so in both the short- and long-run in order to benefit more from trade.

KEYWORDS:  Diaspora finance, FDI, trade, exchange rate, absorptive capacity, ARDL, BRICS