The impact of foreign capital inflows on economic growth of Yemen: Does institutional factors matter?

This study attempts to explain of foreign capital inflows (foreign direct investment (FDI), remittances and aid), corruption and political stability on economic growth of
Yemen. However, FDI, Official Development Assistance (ODA) and Personal Remittances have been considered as component of FCI. Furthermore, the model for analysis was developed based on the Two Gaps economic growth model. However, Augmented Dickey-Fuller (ADF) test is used to check for stationarity and Ordinary Least Square (OLS) estimator has been applied for estimation purposes. The analysis
of this relationship is based on annual time series data for the period of 2003-2013;
while the data have been taken from the World Development Indicators (2015), World Governance Indicators (2015) and some other sources. Furthermore, the correlation between FDI inflows and other variables at the lowest level and the correlation among ODA, political stability and corruption is more than 80% during
the study period. The results show that FDI and ODA have a positive and significant effect on economic growth of Yemen, but personal remittances have significant and negative effects on Yemen's economic growth. In addition, corruption and political stability that explain institution environment are insignificance for economic growth of Yemen. However, the insignificant of corruption and political stability could be due to the fact that correlation is higher than 85% and positive in Yemen during the period of the study. The findings, particularly on FDI, personal remittances, corruption and political stability have some policy relevance at the macro development perspective